AI Spending Faces a New Test as Investors Demand Clearer Returns

The latest tech selloff has put a sharper question to companies building artificial intelligence: when will heavy spending produce dependable revenue? Investors have rewarded big commitments to AI infrastructure for years. Now they’re weighing those costs against results, and punishing some companies when growth or forecasts disappoint.

From its peak on 6 October to the end of the month, the Nasdaq 100 fell by more than 9%. Estimates put the loss in combined market value at around $5 trillion. The scale of the decline points to a change in expectations: announcing an AI investment may no longer be enough to reassure shareholders.

“Investors now want to know when this spending will pay off, and how it will be financed,” said Grégoire Kounowski, head of advisory at wealth manager Norman K. That scrutiny reaches beyond the companies developing AI tools. Hardware suppliers such as Nvidia (NASDAQ:NVDA) have benefited as demand for AI infrastructure has grown, but investors are also asking whether the profits tied to that spending can last.

Search growth brings a harder question for Alphabet

Alphabet’s third-quarter results, reported on 28 October 2026, became an early focus of the selloff. The parent company of Google reported diluted earnings per share of $2.12, down 26.1% from a year earlier and below analyst forecasts of $3.02.

Google Search activity reached a record, yet revenue growth in the segment slowed to 12%, from 17% in the previous quarter. That gap has raised a question about the economics of AI Overviews: if users receive answers directly in search results, can Google still earn as much from advertising around those searches? The figures suggest the issue deserves attention, though they don’t by themselves establish that AI summaries caused the slower growth.

Alphabet shares fell 12.6% the day after the results and lost another 1.4% on 30 October. Dan Coatsworth, head of markets at wealth manager AJ Bell, said the results brought concerns about cash spending and the effect of AI summaries on advertising revenue into sharper focus. He described the report as a possible turning point in the AI story.

Intel added to the pressure, dropping 28.6% on 30 October after issuing a bleak forecast for the fourth quarter alongside its third-quarter results. The reaction shows how quickly sentiment can change when investors see a weak outlook, even amid broad enthusiasm for AI-related businesses. For shareholders, a company’s spending plans matter alongside its ability to meet near-term expectations.

Public concerns could shape the investment story

Investor enthusiasm also depends on how people view AI’s effects beyond company earnings. Research by the Association of Investment Companies, based on a survey of 400 private investors and 200 intermediaries, found that respondents were more worried than positive about the technology, while still recognising some possible benefits.

Misinformation was a concern for 74% of those surveyed, job losses for 73%, and the loss of human skills for 72%. Loss of privacy worried 51%, while 45% were concerned about pressure on water resources. By contrast, 68% viewed improved access to healthcare and medical breakthroughs as a positive possibility.

These views don’t tell investors how AI-related shares will perform. They do help explain why the commercial case may need to include more than rapid adoption. Nick Britton, research director at the AIC, said concerns could receive greater attention if share prices fell and companies had to persuade investors that they could grow while addressing wider worries. For businesses, public trust and practical benefits may become part of the conversation around long-term demand.

What could steady shares?

Earlier bouts of pessimism about AI shares over the past four years were followed by market recoveries. That history offers context, not a guarantee that the next downturn will end the same way. The current test is whether companies can show that spending supports growth without running ahead of the revenue it can generate.

Investors will be watching upcoming earnings from companies including Apple (NASDAQ:AAPL), Palantir (NASDAQ:PLTR) and Advanced Micro Devices (NASDAQ:AMD). Susannah Streeter, chief investment strategist at wealth manager Wealth Club, said investors want capital expenditure at a “reasonable” level alongside growth that beats expectations. Put simply, the market is looking for evidence that companies can expand without allowing spending to outrun progress.

People considering exposure to the theme may encounter AI-focused exchange-traded funds (ETFs) or technology-focused investment trusts, including Allianz Technology Trust (LON:ATT) and Polar Capital Technology (LON:PCT). These options can provide exposure to a group of companies, but they still carry the risks of share price declines and concentrated exposure to technology. An AI label also doesn’t guarantee that a fund will benefit from the technology’s growth.

The useful signal to watch is the link between investment and results: whether revenue grows, whether forecasts hold up, and whether spending remains in proportion to that growth. Until companies make that connection clear, sharp price swings are likely to remain part of the story.