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- Investors are rotating out of tech stocks as they grow increasingly cautious about who is truly benefiting from massive AI spending, causing declines in major names.
- Despite reporting robust earnings and revenues, Alphabet stock fell as the IT giant revealed a sharp increase in AI spending.
- The tech selloff spilled into digital assets, with Bitcoin sliding below $61,000, with over $2 billion in crypto positions liquidated amid heightened volatility.
The AI boom is turning out to be a mixed bag for tech companies.
Some are thriving and reaching new heights, while others are struggling to keep up, creating a clear split between the winners and losers.
Tech Sector Takes a Hit
Tuesday brought a harsh reality check for software, data analytics, and professional services companies.
Their shares took a beating as investors realized that AI development doesn’t guarantee success for everyone in tech. The selloff spread quickly, dragging down major players like Microsoft, AMD, Alphabet, Palantir and Amazon. US stock indices extended their decline throughout the week.
The trouble started last Friday when Anthropic announced the launch of a new AI agent designed to automate work tasks. The markets took two days to assess this announcement, but they ultimately reacted in a bad way.
Investors are now acting cautiously about which tech companies will actually benefit from the AI evolution, and which might get left behind. ⁽¹⁾
Walmart Breaks New Ground
While tech stocks continue to sell off, Walmart became the first retailer to reach $1 trillion in market cap two days ago. The milestone indicated a robust year for Walmart, which saw its stock rise nearly 26%.
Walmart has adopted new strategies to get ahead of its rivals, including using AI in its operations, showing that traditional companies can compete with tech giants.
Alphabet’s Mixed Results Add to Uncertainty
Alphabet’s earnings came out on Wednesday and added more uncertainty for the tech sector. Despite reporting strong earnings and revenues, Alphabet dropped 4.2% the next day.
The company reported fourth-quarter revenue of $113.83 billion, surpassing analyst estimates of $111.43 billion. Google Cloud brought in $17.66 billion versus the forecast of $16.18 billion. However, YouTube Advertising came in slightly below expectations at $11.38 billion compared to the estimated $11.84 billion. ⁽²⁾
The surprise in its earnings came when Google stunned the market with guidance for capital expenditure of $175 billion to $185 billion this year, up from $91 billion to $93 billion in 2025.
It plans a huge investment in AI data centers and the chips to fill them. Most of this investment will go toward AI computing capacity for Google DeepMind. ⁽³⁾
Amazon’s Earnings Disappoint
Amazon shares plunged more than 10% in extended trading on Thursday after the company posted mixed fourth-quarter earnings. The E-commerce giant reported earnings-per-share at $1.95, missing its estimate of $1.97, while revenue came in at $213 billion, higher than its forecast of $211.33 billion. ⁽⁴⁾
Amazon said it expects capital expenditures to continue to climb higher this year as it aggressively invests in data centers and other infrastructure to meet a surge in artificial intelligence demand. ⁽⁵⁾
The company projected capex to hit $200 billion this year, while analysts were expecting $146.6 billion. Amazon’s capital expenditures were roughly $131 billion in 2025. ⁽⁶⁾
Crypto Markets Crumble
Trouble in tech stocks has spilled over into cryptocurrencies. Bitcoin dived below $61,000 this week, hitting its lowest level since November 2024 after dropping 51% from its all-time high of $126,000. Other digital currencies like Ethereum and XRP have suffered even worse losses. ⁽⁷⁾
This week alone, over $2 billion in crypto positions were liquidated. Declines in crypto prices have coincided with broader market jitters. Bitcoin has handed back all of the gains made since President Trump won the election in November 2024. ⁽⁸⁾
Analysts stated that the downturn is made worse by thinning liquidity and a slowdown in institutional demand for digital assets. Hopes that the Trump administration would help bring crypto fully into mainstream finance have dimmed. ⁽⁹⁾
