Tech giants such as Alphabet (GOOGL), Amazon (AMZN), and Meta (META) could collectively pump up to $660 billion into their AI infrastructure buildout, according to estimates. However, persistent escalation in the ongoing U.S.-Israel-Iran war has kept market observers on edge, especially regarding what the global energy supply-chain disruptions and soaring oil prices could mean for this hefty capital expenditure.
Claim 30% Off TipRanks
New trading tool for AMZN bullsIs a Sharp Selloff Ahead?
On Monday, Melissa Otto, the Head of Visible Alpha Research at S&P Global (SPGI), told Reuters that stubbornly elevated oil prices may compel these companies to pare back spending during the first half of this year. This could cause a significant market correction or a very brief period of sell-offs across all equity markets, especially if the higher energy costs are not reflected in upcoming earnings.
A key portion of Big Tech’s planned spending is on chips and building data centers. These facilities run on huge amounts of energy.
The worries come as Big Tech’s capex plans were outlined before the Middle East conflict — which is now in its fifth week — began on February 28. Energy prices have continued to soar even as President Donald Trump continues to threaten U.S. attacks on Iran’s energy infrastructure over the latter’s near-total blockade of the strategic Strait of Hormuz.
Already, Magnificent Seven stocks have all declined over the past month, even as worries have mounted over when the massive investments in AI by tech supermajors will begin to boost earnings at a larger and more impressive scale. It comes as top tech firms have been racking up debt for the AI buildout while shrinking their cash flow.
Wall Street Bets on Resilient Earnings
Yet, Wall Street has offered respite to investors. Data has shown that upward revisions of earnings forecasts for S&P 500 companies have accelerated over the past few weeks in one of the fastest clips in years.
More importantly, the technology sector is expected to lead the pack, with AI bellwethers such as Nvidia (NVDA), Advanced Micro Devices (AMD), and Microsoft (MSFT) expected to deliver strong earnings momentum.
Which Is the Best AI Stock to Buy?
TipRanks’ Best Artificial Intelligence Stocks tool shows that memory chipmaker Micron (MU) currently offers the biggest upside of about 67% based on an average price target of $536.55. This comes with a Strong Buy consensus rating from analysts.
