The $500 Billion Question: Is Big Tech's AI Bet Too Big?

Alphabet just told investors it's doubling down on AI—literally doubling its capital spending for 2026. The market's response? A collective wince that sent the S&P 500 to near two-week lows and the Nasdaq to its lowest point in over two months.

The Google parent's 2.6% stock drop on Thursday wasn't just about one company's spending spree. It crystallized a growing anxiety that's been bubbling beneath the surface of the AI boom: What if the biggest bet in corporate history doesn't pay off?

The Numbers Behind the Nervousness

Big Tech companies are collectively planning to pour more than $500 billion into AI infrastructure this year. To put that in perspective, that's roughly equivalent to the entire GDP of Belgium—invested in a technology that's still proving its commercial value.

Alphabet's announcement was just the latest domino to fall. Microsoft and Tesla each shed about 2%, while software companies like ServiceNow and Salesforce continued their brutal slide. The S&P 500 software and services index has now fallen for seven consecutive days, erasing roughly $830 billion in market value since January 28.

The selloff wasn't limited to tech stocks. Qualcomm plummeted 8.2% after forecasting disappointing revenue, while even Bitcoin dipped below the $70,000 mark as investors fled risk assets across the board.

The Software Scare

Perhaps most telling is what's happening to traditional software companies. As Melissa Brown from SimCorp put it: "The AI trade, which was the accelerant last year, is perhaps the extinguisher this year with people realizing that AI is going to help certain kinds of companies but it is also going to hurt, particularly software."

This isn't just market jitters—it's a fundamental reckoning. If AI tools can automate what software companies have been charging premium prices for, entire business models could crumble. The $830 billion wiped from software valuations suggests investors are starting to price in this disruption.

Meanwhile, money is quietly rotating into overlooked corners of the market. Small-cap and mid-cap indices actually gained ground Thursday, as traders hunt for value away from the AI frenzy.

The Waiting Game

All eyes are now on Amazon's earnings, due after market close, where capital expenditure plans will be scrutinized like never before. But the real test comes February 25, when Nvidia—the last of the "Magnificent 7" to report—reveals whether the AI infrastructure boom is sustainable.

The irony is palpable: Nvidia's stock was marginally up Thursday, even as its biggest customers' shares tumbled. The chipmaker has become the Switzerland of the AI wars, profiting from everyone's spending while remaining relatively insulated from questions about returns.