New York, February 5, 2026, 06:05 (EST)
- Alphabet projects capital spending between $175 billion and $185 billion in 2026, driven by expansions in AI and cloud infrastructure
- AMD dropped 17% after investors reevaluated its AI chip prospects compared to Nvidia
- Software stocks remained under pressure amid concerns that rapidly evolving AI tools might upend established players
World stocks dipped Thursday after Alphabet unveiled plans to boost capital spending to as much as $185 billion by 2026. Chipmaker AMD’s 17% drop the day before added to a tech selloff that’s erased nearly $850 billion in market value this month. Craig Inches, head of rates and cash at Royal London Asset Management, described the markets as being at a “delicate stage.” Reuters
This pullback is significant as investors have relied heavily on a handful of AI-driven megacaps to prop up key indexes. The focus now shifts to expenses — specifically, how much the expansion of data centers will erode margins before revenue growth catches up.
The pressure isn’t limited to chips. Software stocks have been dropping since Anthropic launched new plug-ins for its Claude chatbot, stoking concerns that AI “agents” might automate routine tasks and threaten legacy products.
Alphabet forecasted 2026 capital expenditures between $175 billion and $185 billion, a big jump from the $91.45 billion planned for 2025. Analysts had expected around $115.26 billion, according to LSEG data. CEO Sundar Pichai attributed the spending surge to AI investments and infrastructure fueling revenue growth but noted the company remains supply constrained. Gil Luria of D.A. Davidson said Google Cloud’s expansion positions it as a “legitimate hyperscaler,” putting it in league with Amazon and Microsoft. Reuters
Google Cloud revenue surged 48% in the December quarter, hitting $17.7 billion—its fastest growth rate in over four years. The company also topped estimates for total revenue and adjusted earnings per share. Pichai revealed that the enterprise version of its Gemini model has secured 8 million paying seats across 2,800 companies, while Gemini’s assistant app now attracts more than 750 million monthly users.
AMD aims to challenge Nvidia head-on, but its latest forecast came up short of a market now accustomed to massive AI-driven gains. The chipmaker expects revenue around $9.8 billion, plus or minus $300 million, for the quarter. CEO Lisa Su described sales in China as “dynamic.” Still, Bob O’Donnell, president of TECHnalysis Research, noted, “The expectations for large blowout quarters … have skewed what the market is looking for.” Reuters
Some investors highlighted China-bound AI chip sales, which were cleared under a U.S. license and brought in $390 million last quarter. AMD said that without these sales, its data-center segment would have fallen short of forecasts. Bernstein analyst Stacy Rasgon described the results as “not much beyond inline” once the China boost is stripped out — roughly matching expectations. Reuters
On Wednesday, the S&P 500 slipped 0.51% to 6,882.72 and the Nasdaq tumbled 1.51% to 22,904.58, while the Dow bucked the trend, rising 0.53% to 49,501.30. Semiconductor stocks led the selloff—AMD’s decline dragged the Philadelphia semiconductor index down by 4.4%, with Nvidia off 3.4%. Palantir took a sharper hit, falling nearly 12%. Jed Ellerbroek from Argent Capital described the infrastructure buildout as “unprecedented,” and Josh Chastant at GuideStone Funds called legacy software “a ripe target for AI.” Reuters
Investors shifted toward cheaper stocks: the S&P 500 value index notched a fifth consecutive gain, with energy and materials leading the way. Eli Lilly surged roughly 10% after projecting 2026 profits above expectations, while Super Micro Computer climbed 13.8% following an upward revision to its annual revenue forecast, driven by AI server demand.
Economic data offered little relief. ADP reported U.S. private payrolls grew less than expected in January. A government jobs report, originally set for Friday, was pushed back to Feb. 11 due to a partial shutdown. Traders remain unconvinced the Federal Reserve will cut rates before June. Emily Roland of Manulife John Hancock described the data as “not too hot, not too cold.” Reuters
The bigger risk lies in the spending curve. If demand for AI slows down or companies can’t convert expensive data-center investments into quick profits, tech valuations might face more pressure. Alphabet has warned about capacity constraints, whereas AMD expects no supply limitations.
South Korea’s Kospi led Asia’s downturn, dropping close to 4% as Samsung Electronics and SK Hynix shares tumbled. Bitcoin slipped up to 8%, briefly hitting $69,000—its lowest level since November 2024—in a broad risk-off retreat. Apnews
Investors are bracing for Amazon’s earnings report due Thursday, alongside policy decisions from the Bank of England and the European Central Bank. Wall Street’s next challenge could be seeing if the AI trade continues to expand without companies sacrificing profit for growth.
