The Australian technology sector is on track to decline by as much as 13 per cent this week, fuelled by deepening investor concerns regarding the return on investment in artificial intelligence. These jitters were reignited following the release of Amazon’s latest financial results this morning.
Amazon’s shares plunged 11.1 per cent in after-hours trading on Wall Street after the company announced plans to spend US$200 billion this year on data centres, chips, and related equipment. This substantial investment sparked concerns among investors about whether the company’s significant bet on AI will ultimately prove profitable.
This week, Google also cautioned about increased capital expenditure. Adding to the negative sentiment, US chipmaker AMD’s weaker-than-expected guidance dampened optimism surrounding AI-driven data centre growth. Furthermore, anxieties have emerged that the rise of AI could potentially reduce demand for software companies’ products.
According to Capital.com senior market analyst Kyle Rodda, the primary focus for every tech earnings release is capital expenditure. He noted that markets have reacted negatively to upward revisions in planned capital expenditure from tech companies, raising fears about whether the increased spending will generate sufficient earnings to justify current valuations. On the ASX, WiseTech Global declined 5.7 per cent, Xero 2.9 per cent, NextDC 5 per cent, and TechnologyOne 4.3 per cent. (Note: WiseTech Global provides software solutions to the logistics industry. Xero is a software company providing cloud-based accounting software for small and medium-sized businesses.)
