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The year\u2019s second fiscal quarter is officially underway, and Big Tech is already facing a number of major challenges.<\/p>\n
There\u2019s the question about when companies will start to see significant returns on the massive sums they\u2019re spending on AI data centers; Microsoft (MSFT<\/a>) is contending with its worst stock performance in years; and the war in Iran and resulting fuel crisis continue to suppress shares of some of tech\u2019s biggest names.<\/p>\n Take a look at the Magnificent Seven stocks, and you\u2019ll find that each is down following its most recent earnings report, despite the fact that the majority of them posted better-than-anticipated results.<\/p>\n All of that\u2019s setting up a particularly interesting start to Q2 for Big Tech.<\/p>\n The major hyperscalers, Amazon (AMZN<\/a>) ; Google (GOOG<\/a>, GOOGL<\/a>); and Microsoft, and Meta (META<\/a>) are set to spend $650 billion in 2026 on capital expenditures, with the vast majority of that going toward building AI data centers and developing AI models.<\/p>\n That massive cost has repeatedly spooked investors since the companies began their enormous construction efforts, and will likely keep them second-guessing Big Tech\u2019s strategy until money starts pouring into their coffers.<\/p>\n According to Gartner chief of research John-David Lovelock, the AI build-out has a lot in common with the cloud infrastructure build-out of the late 2000s.<\/p>\n \u201cThe mechanics of the market, the business realities [of]\u00a0 the market are very similar to infrastructure as a service,\u201d he said. \u201cBack in 2008, there were 12 or 14 players that Gartner was tracking, and then it became AWS or Microsoft. This market is probably going to go the same way. Two, maybe three players, at the end of the day, will dominate this market,\u201d Lovelock explained.<\/p>\n The major players in the space aren\u2019t going anywhere anytime soon, but how and where they allocate their spending is something Wall Street will return to again and again for some time.<\/p>\n \u201cThe market is going to continue to be a little uneasy, and I think we could see some volatility and maybe see some resistance to [the] next leg up in price for some of these companies,\u201d Futurum Group CEO Daniel Newman told Yahoo Finance.<\/p>\n Investors also continue to wonder whether AI chip growth can continue at its current pace. And according to Constellation Research founder Ray Wang, the short answer is, yes.<\/p>\n \u201cDemand is real. I mean, everybody’s trying to say there’s no demand, there’s no demand, but at the end of the day, the numbers say otherwise,\u201d Wang explained.<\/p>\n Nvidia (NVDA<\/a>) certainly doesn\u2019t expect AI spending to slow down anytime soon. During the company\u2019s annual GTC event last month, CEO Jensen Huang said the chip behemoth has a throughline to more than $1 trillion in revenue through 2027<\/a>.<\/p>\n<\/p><\/div>\n