Investors are increasingly reassessing artificial intelligence (AI) investments as surging infrastructure spending threatens to weigh on earnings growth and valuation multiples, despite continued strong demand for AI services, according to a new analysis by ING.
The bank said the long-term outlook for major technology companies remains positive, underpinned by the rapid adoption of AI services across industries.
However, it warned that rising capital expenditure is expected to drive up depreciation costs, slow earnings per share (EPS) growth and reduce companies’ ability to fund share buyback programmes that have helped support equity valuations in recent years.
Technology stocks have experienced significant volatility during the first half of 2026 as investors weighed the potential returns on massive AI-related investments.
Microsoft shares fell 20 per cent over the period, while Oracle declined 27 per cent. In contrast, Alphabet gained 14 per cent, reflecting differing investor sentiment towards individual companies’ AI strategies.
Despite investor concerns, ING believes current levels of AI infrastructure spending remain economically justified. Microsoft, for instance, is investing approximately US$65 billion in cloud and AI infrastructure during its 2025 financial year while generating annualised AI revenue of about US$37 billion.
Demand for AI computing capacity continues to outstrip supply, with most large technology companies able to finance their investment programmes through operating cash flow.
The report noted that rising capital expenditure is likely to reduce free cash flow across the sector, limiting the scale of future share repurchases, particularly at Microsoft, Alphabet and Meta Platforms.
Combined with higher depreciation costs, slower buybacks could make investors less willing to assign premium earnings multiples if AI-generated revenues take longer than anticipated to materialise.
Oracle was identified as one of the more vulnerable companies, with its extensive investment programme, including support for Project Stargate, expected to place additional pressure on cash flow and potentially increase funding requirements.
ING also highlighted the possibility of intensifying competition for Nvidia, as major cloud providers including Microsoft, Alphabet and Amazon continue developing their own AI chips to improve infrastructure efficiency and reduce reliance on third-party suppliers.
While acknowledging these risks, ING maintained that the current wave of AI investment is fundamentally sound. The report concluded that the key issue for investors is whether future revenue growth, profit margins and earnings expansion will ultimately justify the unprecedented levels of capital being committed to AI infrastructure.
