Is Wall Street Finally Getting Serious?
Bubbles are starting to pop throughout the markets as crypto crumbles, silver stumbles and software gets slapped.
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We're suddenly seeing a snap out of the complacency that has existed within the market since the sharp-but-brief tariff tantrum of early April. Bubbles are starting to pop everywhere. Bitcoin has dropped approximately 45% from its highs in October. Over that time, some $2 trillion of valuation has been eviscerated from the overall cryptocurrency markets. As Chris Farley from "Tommy Boy" would quip, "that is going to leave a mark."
Crypto is hardly the bubble that is popping in the markets. Silver has been severely erratic over the past week. The poor man’s gold has dropped nearly 40% since late last week. Then we have the software meltdown that has hit a good chunk of the industry on growing fears of being disrupted by the evolving capabilities of AI. Even a mainstay like Salesforce, Inc. (CRM) is off nearly 30% year to date.
This is a lot of losses for funds and investors to absorb in a very short time. And I think they will continue to ripple across the markets in the weeks to come. I wasn’t surprised to see losses accelerate on Thursday. The Volatility Index has moved past the 20 level in recent trading sessions, but the market still feels overly complacent. Especially as it feels like the AI Narrative, that has driven the majority of the gains in stocks since ChatGPT debuted in late 2022, is starting to fade here in 2026.
Investors have gotten a much clearer picture of how much the AI Revolution is going to cost over the past week. Meta Platforms (META) boosted its fiscal 2026 capex budget to $115 billion to $135 billion, up sharply from the just over $70 billion it spent in 2025 for this line item. Alphabet (GOOG) plans to devote approximately $180 billion to capital spending this fiscal year, roughly double what it spent in fiscal 2025. Most of this funding is going to build out AI infrastructure. Combined these two tech titans plan to spend in 2026 what Morgan Stanley believes AI related revenues across the industry will be in fiscal 2029.
Amazon (AMZN) has also just announced it will spend $200 billion in capital expenditures this fiscal year. These huge boosts in spending are going to be positive for GDP growth in 2026. But there are some obvious downsides. There is a question of whether capacity can be added to the electrical grid at a pace to meet this surge in demand. For investors, these increases in capital spending are going to ding profit growth, at least in the near and medium term. And the Magnificent Seven has provided almost all the earnings growth across the markets over the past three years.
Many companies will have to take on significant debt to fund this AI buildout. A key reason Oracle (ORCL) has seen more than half its market capitalization since mid-October evaporate. More money being spent on capital also means stock buybacks will ebb considerably. And this has been a key component of EPS growth for many years.
Whether recent trading sessions are just a "hiccup" or just the start of a series of bubbles continuing to pop, is an unknown. In Monday’s column, I will highlight my game plan to navigate through an increasingly uncertain environment in the months ahead.
At the time of publication, Jensen had no position in any security mentioned.
