Big Tech to invest about $650 billion in AI in 2026, Bridgewater says

Core Insights - U.S. technology giants Alphabet, Amazon, Meta, and Microsoft are projected to invest approximately $650 billion in AI-related infrastructure in 2026, a significant increase from $410 billion in 2025 [1] Investment Trends - The investment surge indicates a shift into a "more dangerous phase" of the AI boom, characterized by rapidly increasing investments in physical infrastructure and a growing dependence on external capital [1] - The demand for computing resources is outpacing supply, prompting hyperscalers to accelerate their investments to meet future demand [1] Financial Strategies - The four companies have reduced share buybacks to finance the increase in capital expenditures [1] - Significant spending creates downside risks if investments do not yield expected returns, particularly for companies like Anthropic and OpenAI, which require major product breakthroughs to secure funding for potential IPOs [1] Market Implications - The tech investment boom is expected to exert upward pressure on U.S. economic growth, contributing approximately 50 basis points to GDP growth in 2025 and potentially around 100 basis points in 2026 [1] - However, this spending may also lead to inflation in technology and communications equipment and increase electricity prices in certain regions [1] Sector Risks - The aggressive investment in AI is creating existential risks for other sectors, particularly software companies and data providers, as evidenced by recent selloffs in software stocks [1] - A severe stock market correction could hinder growth and limit capital-raising capabilities for companies, reminiscent of the Dot-com bubble in 2000, although current market movements are described as much smaller [1]