Big Tech capex plans could validate or derail the S&P 500 rally if Q2 earnings signal hesitation on AI investments.
Morgan Stanley highlights a $1.2 trillion question over Big Tech’s AI spending, which underpins the stock market’s narrow leadership. Hyperscalers’ capital expenditures remain critical, but any slowdown could pressure chip stocks and broader equities.
Wall Street has raised capex estimates for 2026, projecting AI investment to surge from nearly $800 billion to $1.2 trillion by 2027. This spending fuels demand for chips, data centers, and cloud infrastructure, reinforcing the AI trade’s durability.
However, Q2 earnings could reveal hesitation among major AI spenders, some of which have recently underperformed. The rally’s vulnerability to weak signals—from earnings, the Fed, or geopolitics—adds to the risk.