Investors are increasingly demanding evidence that artificial intelligence (AI) investment is generating revenue and profits, as rising technology spending and questions over returns put pressure on major technology companies.
Global markets performed better than expected in October, supported by resilient economic growth and strong corporate earnings. However, technology shares faced renewed pressure as investors reassessed the scale of AI investment and the time required to deliver commercial returns.
The focus is shifting from how much companies are spending on AI to whether that investment can generate sustainable profits and cash flow.
Anthropic’s latest disclosures highlighted the scale of the challenge. Demand for its Claude AI models has grown rapidly, particularly among business customers, but the computing power, data centre capacity and energy required to develop and operate advanced AI systems also carry substantial costs.
Major technology companies have continued to report demand for cloud and AI services. Microsoft and Google reported strength in cloud activity, while Meta delivered revenue growth alongside significant investment commitments. However, investors are paying closer attention to capital expenditure and the returns expected from these investments.
Technology shares came under further pressure in early November, with the Nasdaq falling more than 5% on 5 November as semiconductor stocks weakened. Concerns surrounding potential restrictions on new data centre developments in the United States added to uncertainty, particularly in Texas, which accounts for a significant proportion of expected future capacity.
Although much of the planned 2027 data centre construction pipeline is already underway, tighter planning and regulatory requirements could affect capacity expansion from 2028 onwards.
Corporate earnings have remained relatively strong, with most US companies reporting profits ahead of expectations. However, earnings growth is beginning to moderate following stronger increases earlier in the year, with technology and energy businesses continuing to make significant contributions.
Economic conditions have also remained resilient. Business surveys indicate continued global expansion, while the US economy has demonstrated strength and the eurozone recorded economic growth during the third quarter.
Arbuthnot Banking Group PLC (LON:ARBB), operating as Arbuthnot Latham, offers private and commercial banking products and services in the United Kingdom. Established in 1833, Arbuthnot Banking is headquartered in London, United Kingdom.
