AI’s $650 Billion Hangover: Why Wall Street Is Suddenly Betting Against the Tech Spending Spree

If you’re looking for the canary in the hyperscale data center, try following the money. Or, more specifically, the $650 billion that Big Tech is shoveling into AI infrastructure like there’s no tomorrow. The market, usually a fan of big numbers, is suddenly getting cold feet. The once-unquestioned AI capital expenditure boom is now being treated like a teenager’s maxed-out credit card. The stocks that rode the AI hype train to dizzying heights are now getting the side-eye from investors who’ve seen this movie before, and know how badly it ends when the bill comes due.

The story is everywhere: MarketWatch calls it an “existential” spiral, Seeking Alpha says the AI buildout narrative is “collapsing,” and the numbers are getting harder to ignore. The Big Four, Alphabet, Amazon, Meta, and Microsoft, are on track to spend $600 billion on capex in fiscal 2026, up a staggering 70% year-on-year. That’s not a typo. The market’s reaction? Not exactly a standing ovation. Software and AI-exposed stocks have stumbled out of the gate this year, with the selloff accelerating in February as investors finally started asking, “Wait, what’s the ROI here?”

It’s not just the high-flying AI darlings feeling the heat. The entire tech sector, as measured by XLK, has flatlined at $141.06, refusing to budge even as the rest of the market rotates into old-economy stocks. The S&P 500 Equal Weight Index just hit an all-time high, but the tech-heavy indices are stuck in neutral. The divergence is glaring, and the message from the tape is clear: The market is no longer willing to blindly underwrite the AI moonshot, at least not at these prices.

The context is as much about psychology as it is about fundamentals. For the better part of two years, AI has been the only game in town. Every earnings call, every sell-side note, every CNBC talking head has been tripping over themselves to talk up the transformative power of generative AI. And for a while, it worked. Nvidia, AMD, Microsoft, and the rest minted new highs on the back of “AI optionality.” But at some point, the market started to notice that the cash burn was outpacing the revenue growth, and the narrative started to fray.

The historical parallels are obvious. This is dot-com bubble territory, but with more GPUs and less dial-up. Back then, the story was eyeballs. Today, it’s compute cycles. The difference is that the market is older, wiser, and a lot less patient with negative free cash flow. The AI buildout is real, and the technology is transformative, but the market is asking the right question: Who actually gets paid?

The cross-asset correlations are telling. As AI stocks stall, money is rotating into sectors that actually make things, industrial, energy, even the much-maligned Dow “dinosaurs.” The S&P 500’s K-shaped rally is now a chasm, with tech on one side and everything else on the other. The divergence is as much about risk appetite as it is about fundamentals. When the narrative breaks, the algos don’t wait for the earnings call.

The macro backdrop isn’t helping. Inflation is sticky, the Fed is in no rush to cut, and the full effects of tariffs are about to show up in the next CPI print. For companies burning cash on AI capex, higher rates are a tax on dreams. The cost of capital is back, and it’s not playing nice with the “growth at any price” crowd.

The technicals are ugly. XLK is pinned at $141.06, refusing to confirm the broader market’s breakout. The relative strength index is rolling over, and the moving averages are starting to flatten. The sector’s leadership is gone, and the rotation is picking up steam. The tape doesn’t lie.

Strykr Watch

Traders are laser-focused on $141.00 as the line in the sand for XLK. A break below opens the door to a retest of the $135.00 zone, where the 200-day moving average sits waiting to catch falling knives. Upside resistance is stacked at $145.00, but the sector needs a catalyst, earnings, guidance, or a Fed pivot, to get there. RSI is drifting toward oversold, but there’s no sign of capitulation yet. The volume profile is thinning, and the path of least resistance is lower unless the narrative turns fast.

The risk is that the sector doesn’t just correct, it reprices. If the market decides that the AI capex cycle is a bubble, the unwind could be brutal. The last time tech lost its leadership, the Nasdaq dropped 80%. Not saying it happens again, but the risk is there.

The opportunity is for traders willing to fade the consensus. If you believe the AI buildout is overdone, there’s room to short the laggards or rotate into value. If you think the market is overreacting, watch for capitulation and be ready to buy the blood.

The bear case is simple: Cash burn, rising rates, and a narrative that’s running on fumes. The bull case? AI is real, and the market is just resetting expectations. The truth is probably somewhere in between, but the tape will tell.

For now, the playbook is risk management. Keep stops tight, size down, and don’t try to catch a falling knife. The sector is in the penalty box, and it’s going to take more than a few bullish tweets to get out.

Strykr Take

The AI spending spree has finally met its reckoning. The market is no longer willing to underwrite infinite capex with zero near-term payoff. The rotation is real, and the risk is that tech doesn’t just correct, it gets repriced. For traders, this is both a warning and an opportunity. The easy money is gone, but the volatility is just getting started. Stay nimble, stay skeptical, and don’t believe the hype until the tape confirms it.

(datePublished: 2026-02-07 20:30 UTC)