When it comes to markets, I have long held a core belief: price is the truth.
What I mean by this is that a stock’s movement every day tries to tell a story to investors. Over time, these stories paint a fuller picture.
Of course, the stories are not always precise. Why does a stock plunge or surge when an earnings report surprises in one way or another? This is because the story that market participants were telling was not 100% accurate.
The harsh reactions to the early tech results are testing my patience with this belief in the markets. I suspect something is wrong when markets react as if increased capital spending related to artificial intelligence is a terrible thing.
I observe the use cases closely. I see AI being monetized. And I don’t hear anything about AI investment slowing down – quite the opposite.
I have seen the land promised by the AI and it is becoming more lush every day!
Visitors explore the Google Pavilion at the India-AI Impact Summit 2026 at Bharat Mandapam on February 17, 2026 in New Delhi, India. (Sanjeev Verma/Hindustan Times via Getty Images) · Hindustan Times via Getty Images
“I absolutely believe in the computing power,” AMD (AMD) Chairman and CEO Lisa Su told me. “If I say that AI computation equals intelligence, then why wouldn’t you want more intelligence? Of course you want more intelligence.”
Su added: “The most important thing now is, where is the return on investment on these investments? We are seeing the return on investment. I mean, the fact is that we are increasing our own AI usage at AMD very significantly month over month. And we are seeing that productivity is coming back simply through better products, more powerful products and faster time to market. And that will be seen when you look at the long arc.” [of technology].”
I had a similar conversation this week with Michael Miebach, CEO of Mastercard (MA). Miebach is increasingly using AI to build fraud prevention capabilities. He also devotes himself to agent trading. It’s not a pipe dream – it’s an actual thing that’s starting to happen on the platform.
Then there is the case of IBM (IBM). The company has undoubtedly had a terrible month amid a disastrous profit warning. However, the reason for the decline in profits is the capital allocation to AI and not less to AI.
“What’s new now is that given the AI investments that they’re going to make, which I think will ultimately be monetized and valued, companies are… expanding the infrastructure portfolio to support the future of AI realization,” IBM CFO Jim Kavanaugh told Yahoo Finance.
Yet here we are, watching prominent tech stocks get wiped out.
Alphabet’s capital spending was $44.9 billion in the second quarter, slightly ahead of Wall Street forecasts of $44.7 billion. Full-year capital spending guidance was raised to $195 billion to $205 billion from $180 billion to $190 billion, with a “significant” increase expected in 2027, executives said on the earnings call.
Alphabet shares suffered a 7.13% plunge on Thursday, losing about $293 billion in market value.
I encourage you to read the earnings release again – it’s very obvious that AI is being monetized at Alphabet, and increasingly so.
Tesla (TSLA) said it will invest $25 billion in 2026, about three times what the company has spent in the past. A significant increase is also expected in 2027 as Elon Musk ramps up Optimus and Robotaxi production.
Tesla shares plunged 14.5% on Thursday.
Are these sell-offs really justified? Executives get paid well for betting on the future. These bets are being made today on AI. And in so many cases, the bets on AI made 18 months ago are paying off today.
Do investors believe that as they retreat due to increased capital spending, they know better about the future of technology than Elon Musk and Lisa Su? I certainly don’t.
Give these companies a little cover so they can deliver. I suspect that in 24 months we will be singing from a different hymn sheet.
Brian Sozzi is editor-in-chief of Yahoo Finance and host of Power player with Brian Sozzi Podcast and member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, InstagramAnd LinkedIn. Story tips? Email brian.sozzi@yahoofinance.com.
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