Tech stock pullback tests confidence in AI spending

A 5.5% drop in the Nasdaq 100 last week has renewed scrutiny of the AI investment boom, although tech stocks rebounded on Monday night. Australian datacentre company Firmus’s failed listing has sharpened questions about valuations based on promised earnings. JP Morgan Asset Management strategist Raisah Rasid and NAB chief economist Sally Auld see the pullback as a reassessment rather than evidence of a broader collapse. Minack Advisors’ Gerard Minack remains concerned that investors are overestimating the returns AI providers can deliver.

The stakes are rising as infrastructure spending becomes increasingly debt-funded. American hyperscalers spent $US425bn on AI-related capital expenditure in 2025 and are on track to invest $US800bn this year and over $US1.1tn in the next, according to Minack. Their corporate bonds now account for nearly 10% of the global investment-grade credit market, compared with 0.5% at the end of 2024, according to the International Monetary Fund. The IMF has identified an AI investment bust as a leading threat to the global economy.

Other risks include open source models undermining commercial returns, public opposition to datacentres and concerns about harm to workers. Circular financing arrangements, in which suppliers fund customers that buy their chips, could amplify any demand shortfall. Upcoming US quarterly earnings will offer a fresh test of whether profits justify elevated valuations.