Leadership at big tech companies are willing to spend any amount of money for AI and this has started to spook investors

There was a big sell off with regards to hyperscalers and big tech stocks like google, amazon, microsoft and meta on a relatively flat day today. There's no news headline that could explain it.

I think it's two things:

1) Investors getting spooked by the capex

2) News over the weekend relating to a new chinese model being released which is comparable to SOTA models from western companies

At the heart of it all is spending. Leaders in big tech are willing to spend any amount of money for this AI expansion.

All the free cash flow of the company for the entire year? Yes spend it all

All the cash in the balance sheet? Sure spend it all

Company has negative fcf now, and still need more? Let's go talk to banks to ask them to lend us money

Ok now we've also dipped into our credit line from the banks, what's next? How about dilution? Sure why not...

And when your vendors know you can AND are WILLING to spend any amount of money for something, they will keep increasing the price of their product. Who wouldn't? Which is why memory and storage stocks like sandisk and micron continue to climb up. They can basically name their price, the terms of the contract and these companies are more than happy to sign away.

Now part two is over the weekend a new model from china GLM 5.2 was released. This model in many ways is comparable to even anthropic's Fable 5 model. This is worrying because, here you have the western companies spending like $1T this year and maybe more the next and you have china spending maybe < 10% of that and they are coming out with competitive models at a fraction of the cost.

IMO: MODELS HAVE NO MOAT and ARE A RACE TO THE BOTTOM

If a cheaper model comes out and the performance difference is neglegible, people do and will switch.

I think there will be a breaking point this year where one of these hyperscalers will go:

"ok we've spent enough, we've built enough, there is no rush, let's slow things down"

And this will be the pivot point. And by that point it may not be voluntary, as investors would have sold these stocks down enough where they are forced to cut capex even if the leadership still wants to do their all in bet on AI.