The era of unprecedented expansion is giving way to a volatile period where tech firms’ soaring ambitions feel the squeeze
Artificial intelligence(AI) has entered its “nasty” phase – the fast-moving, volatile period when economic reality constrains ambitions and markets separate winners from losers.
capital expenditure boom, accelerated US-China competition and strategic retrenchment threaten to erase as much wealth as the industry’s unprecedented expansion has created. Returns on capital face mounting pressure to deliver outsize performance. Investors are wary and impatient, rotating portfolios towards companies with clearer paths to profitability, as
the recent sell-offindicates. Nowhere is the scale of the transition more apparent than among the hyper-scalers. Amazon, Alphabet, Microsoft and Meta are collectively expected to spend nearly US$700 billion on capital expenditure in 2026 alone.
Recent earnings releases illustrate the divergent consequences. Meta issued a disappointing revenue forecast as it struggled to prove it can monetise AI, while Microsoft reported record and accelerating cloud revenue, which reinforced the “AI trade”.
Analysts estimate that between US$4 trillion and US$8 trillion will be invested globally in AI infrastructure over the next five years – arguably the largest investment cycle ever.
ChangXin Memory Technologiessoared nearly 470 per cent in its recent market debut in Shanghai, the mainland’s biggest initial public offering (IPO) since 2010. At least six Chinese start-up AI companies are reportedly preparing IPO launches by 2027.