The ‘Big Short’ investor Michael Burry on Sunday said the market has delivered its verdict on Big Tech’s artificial intelligence (AI) spending, with investors increasingly favoring companies showing stronger returns over larger capital commitments.
Biggest AI Spenders Lose Favor
According to a Bloomberg chart shared by Burry on X, Wall Street has pulled back from many of the technology companies committing the most capital to AI, with Google parent Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon.com Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT), Meta Platforms Inc. (NASDAQ:META) and Oracle Corp. (NYSE:ORCL) all underperforming the broader market since the start of June.
Alphabet has been the biggest laggard among the group despite having the highest projected 12-month capital expenditure. At the same time, Apple Inc. (NASDAQ:AAPL) has outperformed the broader market with comparatively lower expected spending.
Valuation Multiples Reflect Investor Skepticism
Another chart highlighted a reset in valuations across much of Big Tech, with forward price-to-earnings multiples for Nvidia Corp. (NASDAQ:NVDA), Microsoft, Amazon, Alphabet and Meta falling from recent peaks as investors reassessed the outlook for AI spending.
“The market has voted and the results are clear,” Burry said.
The shift in sentiment has also weighed on the broader Magnificent Seven trade, with the Roundhill Magnificent Seven ETF (CBOE: MAGS) falling 3.37% so far this year, compared with an 11.60% gain for the Invesco QQQ Trust (NASDAQ:QQQ).
| COMPANY | 1 MONTH | YTD | 1 YEAR | P/E (FORWARD) |
| Alphabet Class A | Down 9.59% | Up 1.46% | Up 66.03% | 22.624 |
| Alphabet Class C | Down 9.16% | Up 1.20% | Up 64.97% | 22.676 |
| Microsoft | Up 3.56% | Down 19.29% | Down 25.52% | 19.724 |
| NVIDIA | Up 6.09% | Up 9.53% | Up 17.02% | 23.585 |
| Amazon.com | Down 3.34% | Up 2.48% | Down 0.29% | 27.397 |
| Oracle | Down 22.18% | Down 41.24% | Down 53.58% | 14.225 |
| Apple | Up 18.20% | Up 22.88% | Up 55.58% | 34.843 |
Not Everyone Agrees With the Market’s Verdict
Burry’s comments come after venture capitalist Chamath Palihapitiya defended Alphabet’s increased AI spending following the company’s latest earnings report and the stock’s sharp selloff last week.
Speaking on the All-In Podcast, Palihapitiya said Alphabet’s decades-long record of generating strong returns on invested capital warranted giving management “the benefit of the doubt” and called the company a “compounding machine.”
Price Action: Alphabet’s Class A shares closed 0.65% higher at $319.74 on Friday and gained another 1.56% in premarket trading on Monday. Class C shares rose 0.24% to $319.09 on Friday before adding 1.51% in premarket trading.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Mehaniq on Shutterstock.com
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