Market Crash Warning: Billions of dollars bet in AI, if returns are not received then stock market may crash, know who gave the challenge?

Business Desk – Market Crash Warning: Artificial Intelligence (AI) is being considered as the world’s next biggest technological revolution. This is why big American companies like Microsoft, Google, Amazon and Meta are investing hundreds of billions of dollars in data centres, AI chips and cloud infrastructure.

Investors hope that this investment will take the earnings of these companies to new heights in the coming years. But now a big question has arisen in this whole story. Will such a huge investment really give that big of a return or could it prove to be a new bubble for the tech sector?

Amidst this concern, Chris Wood, Global Head of Equity Strategy of global brokerage Jefferies, has warned that if AI investment does not generate earnings as expected, then a big correction may be seen in the stock market in the coming time. He believes that compared to the speed at which American tech companies are spending capital, uncertainty about returns is increasing.

Record investment on AI infrastructure, but increasing risks

According to Chris Wood, Microsoft, Alphabet (Google), Amazon and Meta can jointly make capital expenditure (Capex) of about $ 1.57 trillion during the years 2026 and 2027. This amount will be mainly spent on data centers, high-end AI chips, cloud networks and computing infrastructure.

The strategy of these companies is clear. She wants to invest heavily now and earn big money in future from AI based services and cloud business. But if customers start getting better low-cost options, then such a huge investment will not be able to give the expected returns.

Why is China becoming the biggest challenge for American companies?

Till a few years ago, America had a clear lead in the AI ​​race, but now China seems to be rapidly reducing the gap. Chinese companies are developing low-cost large language models, many of which are open-source.

The biggest advantage of open-source models is that developers around the world can easily use them and improve them as per their needs. If global companies start adopting cheaper Chinese AI models instead of expensive American platforms, the returns on investment of American tech companies could be affected.

This is why the competition in AI is no longer limited to just technology, but has also become a battle of cost and business model.

If earnings do not increase, there is a risk of capital wastage.

AI business is not limited to just creating better software. This requires huge expenditure on huge data centres, state-of-the-art semiconductors, power, networking and cloud infrastructure.

If the earnings of companies do not increase at the pace of this expenditure, then it will be considered as capital destruction. In such a situation, investor confidence may weaken and a big fall in tech stocks may be seen.

Is a situation like dot-com bubble developing?

Many market experts believe that the current excitement around AI is somewhat reminiscent of the dot-com era of 2000. Even at that time, there was huge investment in companies keeping in mind the future of the Internet, but later a large number of companies could not survive and there was a sharp decline in the market.

However, Chris Wood believes that AI is not the name of any temporary trend. Its use will continue to increase in the coming years and its demand will also remain strong. His concern is not about technology, but about the fact that the market is probably estimating future earnings too optimistically.

What should investors keep in mind?

Experts say that it would not be wise to invest in a company just because it is associated with AI. Before investing, it is important to see how much the company is spending on AI, how much its income and profits are increasing due to that expenditure, how strong is its cash flow and whether the business model is sustainable in the long run or not.

The competition in AI technology between China and America is likely to intensify in the coming times. This will definitely bring new technologies to the fore, but competition between companies will also be tougher than ever. In such a situation, it will be very important for investors to keep an eye not only on future dreams but also on the actual financial position and earning potential of the companies.