Tech Rout Deepens as Alphabet's Soaring AI Spend Rattles Markets

LONDON/SINGAPORE, Feb 5 – Investor confidence in Big Tech's unassailable earnings power has been dealt a sharp blow. Despite Alphabet Inc. posting solid quarterly results, its announcement of planned capital expenditures between $175 billion and $185 billion for the year – a figure far exceeding Wall Street's expectations – sent shockwaves through global markets, intensifying a tech-led sell-off.

The staggering spend, largely earmarked for artificial intelligence infrastructure, has crystallized growing fears that the AI investment boom may be reaching an unsustainable peak. With tech valuations already stretched thin, the prospect of colossal, profit-diluting expenditures is prompting a brutal reassessment of risk.

"The market's reaction is a classic 'be careful what you wish for' moment," said Michael Vance, a portfolio manager at Horizon Capital. "We wanted AI growth, but the capital intensity required is giving even the bulls pause. This isn't just an Alphabet story; it's a wake-up call for the entire sector's cost structure."

Alphabet shares whipsawed in extended trading, plunging over 6% before paring losses. The anxiety spilled over into Asia, where key semiconductor equipment suppliers saw steep declines. While chip giant Nvidia initially gained, the broader market sentiment turned decisively negative.

The tech turmoil undermined early attempts at a recovery on Wall Street futures. The sell-off broadened into precious metals, with silver plummeting and gold retreating sharply.

European markets braced for a lower open, with investor attention shifting to policy decisions from the European Central Bank and the Bank of England. Both institutions are widely anticipated to hold interest rates steady. The ECB is likely to push back against imminent rate cut expectations, despite the euro's strength posing a deflationary risk. Meanwhile, the BoE is expected to maintain a cautious stance, seeking more conclusive evidence that a cooling labor market will sustainably curb inflation.

"This Alphabet bombshell exposes the fragile psychology underpinning this rally," commented Lena Rossi, a senior analyst at Veritas Research, her tone pointed. "For months, we've blindly cheered every AI announcement. Now the bill is due, and it's terrifying investors. It's pure speculative fever meeting cold, hard financial reality."

David Chen, an independent market strategist, offered a more measured view: "The correction is healthy, if painful. The market is forcing discipline and discriminating between AI hype and viable business models. The long-term drivers are intact, but valuations needed this reality check."

Key developments for the session include the ECB and BoE policy announcements, alongside January Purchasing Managers' Index (PMI) data for the euro zone, Germany, and France, which will provide the latest snapshot of economic health.

(Reporting by Stella Qiu; Additional reporting and analysis by the global markets desk; Edited by Thomas Derpinghaus)