Last week wasn’t great for Big Tech. The FAANG index — Meta (formerly Facebook), Apple, Amazon, Netflix, and Alphabet (Google) — fell 3.7%, while the MAMAA index (Meta, Apple, Microsoft, Amazon, Alphabet) dropped an even steeper 4.6%. By comparison, the S&P 500 index fell only 0.10%.
And this isn’t because companies disappointed on earnings. In fact, combining results from the six “Magnificent Seven” companies that have already reported with estimates for Nvidia, Q4 earnings for the group are expected to rise 24.2% year over year, supported by 18.9% revenue growth.
So what’s the problem?
Investors are growing increasingly concerned about the scale of Big Tech’s spending, which now far exceeds any tangible return from AI, and studies like the one from Boston Consulting Group and MIT show that only about 5–6% of companies are generating meaningful, measurable value from AI, which clearly doesn’t help.
Thus, the market is beginning to value future promises over current results. In other words, investors are tired of waiting. For years, they were willing to overlook sky-high valuations in the hope of a future payoff. Now, they’re starting to demand actual results — results that, so far, largely aren’t there.
And yet the spending isn’t slowing down. In 2026 alone, Microsoft, Alphabet, Amazon, and Zuckerberg’s “forbidden fruit” are expected to invest around $650 billion into AI.
At the same time, speculation around a potential OpenAI IPO adds another layer to the story. A listing could reignite AI enthusiasm and provide a long-awaited liquidity event — but it would also force the market to put a real price on AI’s economics, potentially exposing how much of the thesis still rests on expectations rather than profits.
The parallels with the late-1990s dot-com bubble are becoming harder to ignore. Back then, massive CAPEX, lofty expectations, and soaring valuations moved in lockstep — until they didn’t. While today’s tech giants are largely self-funding, a prolonged failure to deliver tangible AI returns could still trigger deeper drawdowns.
That said, there is an important political nuance. By the summer of 2026, the U.S. election campaign will be in full swing, and Republicans, currently seen as the “party in power,” will likely want a positive market boost. This means we could still see a new TACO from President Trump if the Fed does not turn more dovish by then.
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