The markets are proving very hard to please

Despite strong earnings growth on indexes in the US, investors are showing little enthusiasm as concerns over Big Tech and economic uncertainty persist

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for good reason: their earnings-per-share growth has far outpaced that of the other 493 firms that make up the S&P 500, a gap particularly pronounced last year when Nvidia and Meta delivered outsized profit surges amid general middling performance from the rest of the market.

But that exceptionalism is now under strain. The costs of pursuing AI - or in its latest iterations, “artificial general intelligence” or even “superintelligence” (no one seems to have any idea what any of this means, least of all the tech firms themselves) - are squeezing margins. In the third quarter alone, Alphabet, Amazon, Meta and Microsoft together spent $112-billion on capital expenditure.

These sums are staggering, even by Silicon Valley standards. If AI can be compared to alchemy, the fruitless quest to turn lead into gold, then it is proving an expensive hobby. Investors, once content to give the benefit of the doubt to the narcissists who run these companies, are now more cautious.

Flying blind

Worries about the future of Big Tech coincide with renewed jitters on the state of the broader economy. The University of Michigan’s index of consumer sentiment fell in November to its lowest level in three years.

Many will shrug and say, who cares? For much of the post-pandemic period, bad readings on consumer sentiment have been completely at odds with actual spending and economic

The pessimism is compounded by political dysfunction. The longest government shutdown ever is clearly weighing on consumer and investor confidence

activity in the US, and have certainly not been a reliable guide to market performance.