Tech spending plans will test AI trade

Spending updates this week from US megacap companies that are investing massively in artificial intelligence could jolt the Al trade that has been a primary driver of the record-breaking US stocks rally.

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Capital spending is a crucial component of the Al trade that has propelled equities following the launch of Al assistant Chat GPT in November 2022, reported Reuters. With the benchmark S&P 500 up about 17% year-to-date and 90% since the bull market began just over three years ago, investors are on guard for any weakness while wary of parallels with the dotcom market bubble 25 years ago.

The rally has been led by a select group, including chipmaker Nvidia, which has

Investment by the biggest companies, including Microsoft, Alphabet, Meta Platforms, and Amazon, serves to build out the infrastructure that supports the burgeoning industry while signaling confidence in the theme, investors said.

"You want to still see that they are investing in these Al data centers and still continuing to build," said Don Nesbitt, senior portfolio manager at F/m Investments. "If you start to see them falter, then that is kind of a bellwether for the whole Al theme."