Analysis-Tech spending plans will test stock market's AI trade

Core Insights - U.S. megacap companies are significantly investing in artificial intelligence, which could impact the AI trade that has driven the recent stock market rally [1][2] - Capital expenditures (capex) from major companies like Microsoft, Alphabet, Meta Platforms, and Amazon have doubled from 2022 to 2024, exceeding $200 billion, and are projected to reach approximately $500 billion by 2027 [3] Investment Trends - The capital spending is crucial for building the infrastructure necessary for the AI industry and reflects confidence in the sector [3][6] - Investors are closely monitoring quarterly reports from these companies for insights on spending trends and expected returns [4][5] Market Sentiment - There is a cautious optimism among investors regarding AI spending, with a focus on avoiding parallels to the dot-com bubble [2][5] - The current spending levels indicate that hyperscalers are allocating 60% of their operating cash flow to capex, marking a record high [7]