Tech Investors Reassess AI Stocks Amid Soaring Infrastructure Costs, ING Says

Investors are reassessing the artificial intelligence sector as the immense cost of infrastructure development threatens to weigh on earnings growth and stock valuations, according to a recent analysis from ING. While long-term demand for AI services remains robust, the near-term financial impact of massive capital expenditures is prompting a more cautious outlook.

The High Cost of AI Dominance

Major technology companies are engaged in an unprecedented spending spree to build out the necessary cloud and AI infrastructure. This surge in capital expenditure is expected to increase depreciation costs, which could slow earnings per share (EPS) growth in the near term for key players including Microsoft, Alphabet, and Meta Platforms.

According to ING, current spending levels are viewed as economically sound as demand continues to exceed available capacity. For instance, Microsoft is investing approximately $65 billion in cloud and AI infrastructure in fiscal 2025 while generating an annualized AI revenue of roughly $37 billion. However, the scale of these investments is creating new financial pressures.

Pressure on Valuations and Shareholder Returns

The elevated spending is forecast to reduce free cash flow, which could limit the capacity for share buybacks—a key mechanism that has historically supported equity valuations. This dynamic has contributed to stock price volatility, with the source noting that in the first half of 2026, Microsoft shares fell 20% and Oracle dropped 27%, while Alphabet gained 14%.

Ad

Slower buybacks combined with higher depreciation costs could make investors less willing to pay premium earnings multiples, particularly if significant AI revenue takes longer than anticipated to materialize. The central question is whether future growth will ultimately justify today's level of investment.

Company-Specific Risks

Certain companies face distinct challenges amid the AI arms race. ING highlighted Oracle as a higher-risk case, suggesting its investment program could strain cash flow and increase its funding requirements.

Meanwhile, chip designer Nvidia may face stronger long-term competition as major customers like Microsoft, Alphabet, and Amazon develop their own custom AI chips to improve infrastructure efficiency and reduce costs.