The Once-Hot AI Trade Hit a Snag. Some Experts Call That a 'Fantastic' Sign.

• Big Tech's AI spending is surging dramatically: Alphabet and Meta plan to double infrastructure spending year-over-year, while Amazon forecasts $200 billion for 2026 (50% increase) and Microsoft's capital spending rose over 60% last quarter
• Software stocks face existential concerns as Anthropic released AI tools for legal work, triggering fears that 'vibe coding' and automated AI assistants could upend the traditional software-as-a-service business model
• Market strategists view the correction positively, noting tech stocks now trade at only a 10% premium to the broader market (down from higher levels), relieving bubble concerns while AI infrastructure suppliers like Sandisk remain beneficiaries with shares up nearly 150% this year

Summary

Key Development:

The AI investment trade experienced significant volatility this week as Big Tech's massive spending plans sparked concerns about returns on investment, while new AI tools from Anthropic triggered fears of software industry disruption.

Major Spending Announcements:

• Alphabet and Meta: Infrastructure spending to double year-over-year
• Amazon: Forecast $200 billion in 2026 capex, up 50% YoY and $50 billion above Wall Street expectations
• Microsoft: Capital spending expected to remain elevated, up over 60% in recent quarters

All four "hyperscalers" (Meta, Microsoft, Alphabet, Amazon) committed to aggressive AI infrastructure investments during recent earnings reports.

Market Impact:

The S&P Software & Services Index plummeted over 20% since year-start, driven by concerns that AI tools and "vibe coding" could disrupt the software-as-a-service (SaaS) business model. Companies like Intuit and Salesforce experienced notable declines.

However, Meta and Microsoft also saw selloffs following disappointing cloud computing results—key proxies for AI-driven growth.

Expert Perspective:

Some analysts view this correction positively. Gina Martin Adams of HB Wealth Management called the tech premium reduction to 10% relative to the broader market "fantastic," arguing it represents a healthy reset of overly optimistic expectations after three years of trading purely on AI promise.

Winners:

Memory device makers like Sandisk benefited from AI data center demand, with stocks up nearly 150% year-to-date. Tech stocks rebounded Friday as investors refocused on infrastructure suppliers.

Bottom Line:

The market is shifting from AI promise to practical economic implications, questioning both winners and potential losers in the AI deployment phase.