Goldman Sachs Warns Big Tech's $770 Billion AI Spending Frenzy Could Backfire— Here's Why

Goldman Sachs warns that major tech companies' massive $770 billion AI capital expenditure in 2026 could significantly harm profitability. The spending is transforming asset-light hyperscalers into capital-intensive enterprises, with depreciation costs expected to rise from 7% to 12% of revenues by 2027. This will compress profit margins and reduce Return on Equity by an average of 700 basis points for the seven largest tech stocks. However, strong Q1 earnings showing AI monetization success provides some optimism for long-term returns.