The global artificial intelligence trade is showing signs of fracturing as investors grow wary of soaring capital expenditure, rising debt levels, and uncertainty about who will ultimately profit from the technology. Markets are now diverging across stocks, sectors, and even regions. The initial surge in anything AI-related following the launch of ChatGPT in November 2022 has given way to a more discerning approach, with investors drawing sharper lines between potential beneficiaries and those at risk of disruption.
This shift comes as companies like Microsoft, Amazon, Alphabet, and Meta invest hundreds of billions of dollars in AI. Recent market volatility suggests a turning point, as investors weigh the promised payoffs against rapidly escalating costs. Software stocks have been particularly hard hit, widening the gap between hardware makers powering AI data centres and firms further down the supply chain. For instance, in the U.S., ServiceNow and Salesforce have experienced significant declines this week, while European data and analytics firms like RELX and London Stock Exchange Group have also suffered.
This divergence extends to the “Magnificent Seven” group of highly valued U.S. stocks, with investors increasingly scrutinising the return on capital expenditure. Microsoft and Meta, for example, reported higher capital expenditure, but their share price reactions differed sharply. While the winners and losers among AI adopters remain unclear, investors are increasingly betting on chipmakers, especially those exposed to AI-driven demand for memory. This has made South Korea, home to major memory producers like Samsung Electronics and SK Hynix, a standout market.
