Sell-Offs Powered by AI
February 19, 2026
Artificial intelligence (AI) continues to dominate the news cycle and drive markets, but sentiment has shifted. Instead of feeling bullish on AI’s potential to drive growth, efficiency and earnings, investors are increasingly concerned about the implications for companies that could become obsolete due to AI and growing wary of increased AI capital expenditure (capex) spending by technology firms. As companies have reported earnings this quarter, market pullbacks broadened beyond software into transportation, commercial real estate and other areas of the market, even as earnings and forward estimates remained intact.1 Companies are also acknowledging the concern, with management mentions of AI disruption on earnings calls surging well beyond levels seen in past quarters.2
However, technology companies are also experiencing volatility and investor offloading. Post-earnings, many technology stocks declined, as investors grew concerned about ballooning capex, with company capex guidance far exceeding market expectations. Capex spending by five of the largest technology companies is expected to exceed $700 billion this year, up from around $150 billion in 2022.3 To fund this spending, Big Tech has, in part, turned to the bond market, issuing some of its largest-ever deals amid record investor demand.4 As capex for Big Tech climbs to over 20% of revenues to fund massive projected spending on AI, chips and data center infrastructure, the actual return this spending will deliver remains uncertain.5 Traditionally, these companies have operated on more asset-light models, which have allowed for greater returns and valuations compared to more capital-intensive businesses, with Big Tech return on invested capital exceeding 20-25% in recent years.6 Big Tech will need to demonstrate it can adopt a capital-intensive, asset-heavy model while continuing to generate similar returns for investors and keep debt loads manageable.
Key Takeaway
As investors weigh the disruptive impact of AI, uncertainty regarding industry displacement and doubts over whether Big Tech’s unprecedented AI investments will ultimately deliver returns are driving recent sell-offs across industries. While much is still unknown about how AI will develop and what effect it will have on each industry, non-AI companies will need to demonstrate that they can evolve and adapt the use of AI to remain competitive, while Big Tech will need to deliver on the lofty expectations for transformative AI that have fueled such ambitious spending.
Sources:
1,2Bloomberg – S&P 500 Erases Nearly 1% Drop Amid AI Volatility: Markets Wrap; 2/17/26
3The Wall Street Journal – Picks and Shovels Still Rule the AI Tech Trade; 2/9/26
4Bloomberg – Alphabet Embarks on Global Bond Spree to Fund Record Spending; 2/9/26
5,6RBC Wealth Management – Big Tech’s AI expansion: From investment to scalable returns; 2/3/26
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