Big Tech earnings may not ease AI spending fears

Wall Street is bracing for earnings reports from Alphabet, Microsoft, and Amazon this week, with investor focus fixed on AI spending levels and profitability rather than expected revenue growth. Any disappointment could trigger sharp selloffs, following Meta's 6.1% stock drop last week after raising capital expenditure commitments. The three tech giants are projected to post double-digit revenue gains, but anxiety is heightened by soaring oil prices, Treasury yields, and geopolitical tensions. Investors have shown no patience for higher AI capex, especially as concerns grow over debt-financed infrastructure and slowing AI revenue growth, with Gartner estimating $3.5 trillion in spending could be at risk by 2030. Megacap tech stocks have underperformed the broader market in 2026, with the Magnificent Seven index up just 6.5% versus the S&P 500's 11% gain. Despite lower valuations and strong earnings growth forecasts, analysts warn that heavy AI spending plans and negative free cash flow could keep markets fragile, though some see potential for relief if spending proves profitable.