Big tech AI spending sends Wall Street into sharp sell-off

U.S. stocks tumbled as investors digested sweeping AI spending plans from major technology firms and a surge in corporate layoffs, sending the Nasdaq to its weakest level since November and pulling the S&P 500 lower. The losses on Thursday reflected fresh concern that a large cycle of capital expenditure may not quickly translate into revenue or profits, intensifying volatility across the sector.

Alphabet said in its fourth-quarter earnings report that it expects 2026 capital expenditures in a range of $175 billion to $185 billion, roughly double the $91.4 billion it invested in 2025 and well above Wall Street forecasts that centered near $120 billion. Industry estimates now put combined AI investment by the largest tech companies at about $500 billion this year, a scale that has forced investors to reassess the near-term payoff from massive cloud, data center and chip investments.

Market data showed steep declines across the tech complex. Microsoft shares fell about 5 percent, Palantir lost 6.8 percent, Oracle slid 7 percent and Nvidia declined 1.4 percent. Alphabet shares touched an intraday low of roughly 5 percent before later snapshots showed a smaller decline of about 0.55 percent. Amazon plunged 4.4 percent in regular trading and then tumbled another 10 percent after the close. Analysts warned the moves reflect both the size of planned spending and uncertainty about returns.

The sell-off was amplified by a sharp increase in announced layoffs. Challenger, Gray & Christmas reported 108,435 job cuts in January, up 118 percent from a year earlier and the highest January total since 2009, a signal some investors took as further evidence the labor market and consumption could weaken. “This is the first time we've seen the large-cap tech companies the Microsofts and the Alphabets and the Amazons go through a really large capex cycle ... and we're seeing this volatility about whether this investment will translate, ultimately, into results,” said Tom Hainlin, an investment strategist at U.S. Bank Wealth Management.

Other market watchers framed the rout as a broader reassessment of the optimistic narratives that had supported stocks. William Stern, founder of fintech firm Cardiff, said markets were reacting to a collapse of complacent assumptions: “Wall Street is panicking because the ‘soft landing’ fairy tale just hit a wall,” he said. “For a year, investors convinced themselves that rates would drop, AI would save productivity, and the labor market was bulletproof. Today’s data shattered all three illusions at once.”

The shock rippled beyond U.S. equity markets. Asian technology stocks tracked the declines, with Japan’s TIS plunging almost 16 percent and Trend Micro and NS Solutions off more than 7 percent. India’s Nifty IT index fell 6.7 percent as Tata Consultancy Services dropped 6.6 percent, Infosys slid 8 percent and HCL fell 5.3 percent. Cryptocurrencies also moved deeper into the red as risk appetite waned.

The episode comes amid earnings season and mounting scrutiny of how quickly AI investments will bolster top lines and margins. Investors will be watching upcoming corporate earnings, companies’ capex disclosures and labor data for signs that spending is converting to profit or that demand is slowing. If the payout from this vast AI investment cycle remains unclear, volatility in large-cap tech and the broader market is likely to persist.