Why tech investors are reevaluating AI investments
Lead — As tech investors reassess the landscape of AI funding, they are grappling with the implications for earnings growth among leading firms. Per the full note source, while the AI revolution remains a long-term positive narrative for Big Tech, expectations of diminished EPS growth and increased depreciation costs due to infrastructure spending are shifting investor sentiment. Notably, tech stocks have displayed substantial volatility, with Microsoft and Oracle's liquidity pressures evident in declining share prices of 20% and 27% respectively during H1 2026, contrasting Alphabet's impressive gains. This volatility could challenge broader equity valuations despite sustained interest in AI development.
What the desk is arguing
The desk argues that while the long-term prospects for AI investments in Big Tech remain bright, near-term uncertainties regarding profitability are likely to cause investor caution. Per the full note source, the rapid pace of capital expenditure necessary for AI infrastructure could suppress earnings growth and share buybacks in the coming years.
A critical point highlighted is the stark retreat in stock performance for key players such as Microsoft and Oracle, whose prices dropped considerably in the first half of 2026 amid these shifting investor sentiments. This reflects a broader trend of apprehension as firms, including OpenAI and Anthropic, leverage funding that often exceeds their current cash flows.
Where it sits in our coverage
Our consensus target for the USD/EUR pair stands at 1.075, with a range between 1.04 and 1.12. Notable targets from specific firms include: - jpmorgan: 1.10 for Mar26 - bofa: 1.04 for Mar26
This perspective aligns with jpmorgan, which maintains a bullish stance at the upper end of the target spectrum, while bofa presents a more conservative outlook, reflecting a potential divergence in market sentiment tied to the tech sector's performance.
How other firms see it
Several firms, including jpmorgan and gs, are aligned in their positive outlook for AI investments, recognizing the long-term strategic advantages. Conversely, bofa cautions against overexposure, emphasizing potential risks associated with the volatility in earnings stemming from infrastructure spending.
Traders should monitor the USD/EUR trajectory, particularly given its sensitivity to shifts in economic policy and technology sector performance as the macroeconomic landscape evolves.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Investment in AI remains a long-term positive for Big Tech despite expected EPS slowdowns.
- 02Volatility in tech stocks signifies investor concerns over infrastructure spending and cash flow mismatches.
- 03Contrasting stock performances illustrate divergent investor sentiment toward different tech firms.
Market implications
Watch for fluctuations in the USD/EUR pair as tech earnings reports loom. Continued volatility could suggest a reevaluation of AI investment strategies among major firms, impacting overall market sentiment moving forward.
Risks to this view
Should macroeconomic indicators turn unfavorable or if regulatory pressures increase on AI investments, this could induce a reversal of current trends, leading to further declines in tech stock valuations and impacting overall investor confidence.
Articles Why tech investors are reevaluating AI investments 08:23 TMT United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download AI investment remains a positive long-term story for Big Tech, but investors may see slower EPS growth and lower valuation multiples as infrastructure spending increases depreciation costs and reduces share buybacks. We examine the valuation implications for the largest tech firms, and how risks differ for companies from OpenAI to Anthropic Jan Frederik Slijkerman Strong AI demand is clear, but the future returns on today's spending remain uncertain Future earnings uncertainty may drive equity volatility We see a positive future for large technology providers, as the adoption of AI-based services continues to increase. Expected revenues are set to climb, as is EBITDA, as noted here .
Yet investors remain nervous. Technology stocks have recently shown large intraday declines. During the first half of 2026, Microsoft’s share price declined by 20%, while Oracle fell by 27%.
Alphabet, on the other hand, rose by 14%. In this note, we discuss the factors behind this share price volatility. Although we think the overall technology market can sustain heavy investment in new AI data centre infrastructure, earnings per share growth is likely to slow, influencing equity valuations.
Broadly speaking, most credit profiles continue to look fine. Nevertheless, some companies such as OpenAI, Anthropic and Oracle are investing at a pace that exceeds incoming cash flows. Current investments are up (US$) (Fiscal reporting year; Oracle has reported results for 2026) Source: Refinitiv, ING "> (Fiscal reporting year; Oracle has reported results for 2026) Source: Refinitiv, ING Not a problem: Investing in building the infrastructure of the future Despite some occasional doom-mongering by regulators such as the Bank for International Settlements, we think current investments in AI infrastructure are made based on sound economic rationale.
For example, Microsoft invested US$65bn in Cloud and AI infrastructure in F2025, and the company reports annualised run-rate revenues from AI-based services of US$37bn. This shows there’s demand for its investments. Also, technology companies have stated that they cannot deploy AI capacity fast enough to meet customer demand.
It means demand for AI computing exceeds supply. Importantly, most companies can fund these investments through operating cash flow. As a result, industry leaders have little need to take on additional debt, and their balance sheets generally remain strong.
The ability to cover investments from existing cash flow can be seen in the chart above (where EBITDA is used as a proxy for operating cash flows). As widely documented, Oracle is a bit of an outlier, with a more aggressive investment programme. This will be discussed below.
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