AI Giants Under Scrutiny Amid Record Spending Spree
Tech behemoths face mounting pressure as their astronomical AI investments collide with stretched valuations. The MSCI World Index trades at 20x forward earnings—a premium to its 17x decade average—leaving little room for disappointment. First-quarter earnings must now validate last year's 19% equity rally built on speculative fervor.
Wall Street anticipates 8% Q4 earnings growth for the S&P 500, with 11% quarterly gains projected through 2024. Asia outpaces with 14% expected profit growth, while Europe limps along at 1%. Early results paint a fractured picture: Wall Street banks signaled economic fragility, Richemont underwhelmed, but TSMC's bullish AI chip forecast ignited global risk appetite.
The $530 billion capex planned by Meta, Microsoft, Amazon, Alphabet and Oracle represents an all-in bet on AI dominance. While Magnificent Seven profits likely surged 20% last quarter—quadruple the broader market—cracks in the narrative emerged as early as 2025. Traditional sectors like energy and healthcare now scramble to keep pace with tech's spending arms race.
