(Investorideas.com Newswire), a platform for big investment ideas including AI and technology stocks, publishes market commentary from deVere Group.
Big Tech’s $660 billion increase in spending is raising concerns about the AI bubble among investors — but those are short-sighted concerns, says the CEO of one of the world’s largest independent financial advisory organizations.
The analysis from Nigel Green of deVere Group comes as technology shares sold off heavily after the sector’s majors unveiled plans to spend $660 billion on artificial intelligence this year.
Amazon, Google, Microsoft and Meta are planning an increase in capital spending on data centers and specialized chips, which will take their combined spending well above last year’s $410 billion, a jump of about 60% and an amount that rivals the output of mid-sized economies.
Amazon has gone the furthest, warning that investments will reach $200 billion this year alone, $50 billion more than markets expected, eclipsing the already huge commitments from Google and Microsoft.
Nigel Green says: “The scale has confused shareholders despite strong cloud revenues, wiped out hundreds of billions in market values and revived familiar questions about whether the AI arms race is drifting from strategic investments to excesses without real performance.”
“While these concerns are understandable, and I believe the AI reckoning on profitability has already begun, you could argue that these fears among AI investors are shortsighted.”
He continues: “The size of the number is what makes people nervous, but the framing is wrong. This is not capital being sunk into a single product that has to quickly justify itself.”
“What is being built is a foundational layer that underpins everything these companies do and will do in the future.”
DeVere’s CEO argues that the market reaction ignores how these types of investments actually work.
“Much of the spending is concentrated upfront, but goes toward long-lived infrastructure. The accounting impact is spread over many years, even if the monetary commitment is immediate.”
He says expectations of a decent, standalone payback period also miss the mark.
“AI doesn’t have to emerge as a separate revenue stream to generate returns. Its value will be reflected in stronger customer loyalty, greater pricing impact, and lower churn on existing platforms.”
“Even marginal improvements on that scale translate into substantial, recurring gains.”
In the cloud companies, the economics are becoming clearer.
As AI workloads mature, they lock customers into higher value contracts. This will support stronger margins over time rather than eroding them. These cloud platforms already generate exceptional profitability, and advanced AI deepens that advantage.
Nigel Green adds that some of the spending is defensive by necessity. “Maintaining relevance requires scale. The market may resent the escalation of competition, but for the companies involved, standing still is not an option.”
He concludes: “The volatility surrounding these investments reflects uncertainty about timing, rather than a collapse in the underlying logic. Similar doubts surrounded previous waves of infrastructure spending, which later proved fundamental.”
“This phase of AI investment, in my view, is laying the foundation that will likely sustain earnings power for many years to come.”
“Underinvestment by these tech titans is perhaps the biggest risk.”
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