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European markets braced for a turbulent opening on February 5th as fears about soaring artificial intelligence spending triggered widespread selling across global technology stocks. The selloff intensified after Google parent Alphabet announced capital expenditure targets of $175 billion to $185 billion for the year, significantly exceeding Wall Street expectations and raising concerns about the sustainability of massive AI investments.
Alphabet shares initially plunged more than 6 percent in after-hours trading before recovering slightly to close 0.4 percent lower, according to market data. The announcement came amid heightened investor anxiety over AI spending costs and already elevated technology valuations, setting a cautious tone ahead of the European Central Bank and Bank of England policy meetings scheduled for Thursday.
AI Investment Concerns Spread Across Markets
The massive capital expenditure announcement by Alphabet highlighted growing concerns about artificial intelligence infrastructure costs among major technology companies. While chip manufacturer Nvidia saw its shares rise 2 percent after hours, the broader market reaction suggested investors are questioning whether current valuations can support such aggressive spending levels.
Asian technology equipment providers bore the brunt of the selling pressure, with South Korean markets falling 3.5 percent and Taiwan declining 1 percent. The weakness reflected broader concerns that AI spending could squeeze profit margins even as companies race to develop competitive artificial intelligence capabilities.
Commodity Markets Face Sharp Declines
The selloff extended beyond technology stocks to precious metals, with silver plummeting 14 percent and gold falling well below $5,000 per ounce. Wall Street futures initially attempted to recover but quickly lost momentum as selling pressure intensified across multiple asset classes.
Additionally, the sharp moves in commodity markets suggested investors were reducing exposure to risk assets broadly rather than simply rotating out of technology stocks. The simultaneous decline in both equities and traditional safe-haven assets like gold indicated heightened uncertainty about market direction.
Central Bank Decisions Ahead as AI Spending Weighs on Markets
European futures pointed to a lower opening as investors awaited policy decisions from the European Central Bank and the Bank of England. Both institutions are expected to hold interest rates steady, though their forward guidance could provide important signals about future monetary policy direction.
The ECB is likely to indicate that no immediate policy changes are planned, even as the euro’s recent strength against the dollar raises concerns that inflation could fall below the central bank’s target. Meanwhile, the Bank of England is expected to maintain flexibility regarding future rate cuts while monitoring whether labor market weakness will help contain inflation pressures.
Technology Valuations Under Scrutiny
The market reaction to Alphabet’s capital expenditure plans underscored growing investor concern about technology sector valuations in the face of mounting AI investment costs. Analysts noted that sky-high valuations leave little room for disappointment, particularly as evidence emerges that artificial intelligence can replace certain jobs in data analytics and software development.
However, the divergence between Nvidia’s positive after-hours performance and broader Asian technology declines suggested investors are attempting to distinguish between AI infrastructure beneficiaries and companies facing cost pressures. This selectivity could shape market trends as more technology firms report quarterly results and outline their artificial intelligence spending plans.
Market participants will closely monitor upcoming economic data from the eurozone, including January PMI figures for the region, Germany, and France, which could provide additional context for central bank policy decisions. The intersection of monetary policy uncertainty and technology sector volatility is expected to drive continued market fluctuations in the near term, though the timeline for any resolution remains unclear.
