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Sector Analysis2026-02-08
Big Tech's $650B AI Capex: Semiconductor ETFs Surge
Big tech companies including Google, Meta, Amazon, and Microsoft are investing a combined $650 billion in AI infrastructure in 2026. With NVIDIA's CEO declaring demand is exploding, semiconductor ETFs have posted sharp gains.
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Bloomberg's report that big tech companies will collectively spend $650 billion on AI infrastructure in 2026 has once again put the semiconductor sector in the spotlight. NVIDIA CEO Jensen Huang described AI chip demand as "going through the roof," sending shares of NVIDIA and AMD sharply higher in tandem. Capital inflows into semiconductor ETFs such as SOXX and SMH have accelerated, reaffirming that the AI investment theme remains the market's core growth driver heading into 2026.
Composition and Scale of the $650 Billion AI Investment
According to Bloomberg's tally, the combined AI-related capital expenditures of Google, Meta, Amazon, and Microsoft are expected to reach $650–700 billion in 2026—roughly a 40% increase from 2025. The investment focus centers on building AI data centers, expanding GPU clusters, and developing proprietary AI chips. Google is proceeding with large-scale purchases of NVIDIA H200s while simultaneously scaling its own TPU deployment, and Meta plans to break ground on 10 new data centers dedicated exclusively to AI training.
NVIDIA's Dominance and the Reshaping of the Semiconductor Supply Chain
According to Investopedia, NVIDIA's stock surged 8% in a single day following CEO Jensen Huang's comments about an explosive demand surge. Broadcom and TSMC also emerged as major beneficiaries of rising demand for custom AI chips. Tower Semiconductor drew attention after announcing a new AI-related partnership with NVIDIA. SOXX ETF climbed 5.2% on a weekly basis, while SMH ETF rose 4.8%, confirming broad-based strength across the semiconductor sector.
A Stark Contrast with the Software Sector
While semiconductors surged, the software sector told a very different story. Wedbush analyst Dan Ives, as cited by Yahoo Finance, described the sharp sell-off in Microsoft and Salesforce as "the worst software selloff in 25 years." The concentration of AI investment in hardware amplified concerns about delayed monetization for software companies. This highlights the importance of granular sector selection even within the AI theme, as performance within XLK has diverged sharply between individual names.
Global Semiconductor Industry Outlook for 2026
Deloitte's 2026 Global Semiconductor Industry Outlook projects that AI chip revenue will account for 30% of the total semiconductor market. The overall market size is expected to exceed $750 billion, representing 15% year-over-year growth. The HBM (High Bandwidth Memory) segment is forecast to grow 80% year-over-year, driven by explosive demand for memory essential to AI training and inference workloads. TQQQ investors are closely watching these Nasdaq growth catalysts.
Semiconductor ETF Investment Strategy and Risk Management
Investing in semiconductor ETFs requires careful management of sector concentration risk. SOXX and SMH both have top-10 holdings weightings above 60%, making them vulnerable to single-stock risk. Using an asset allocation calculator to cap semiconductor sector exposure at 10–15% of the total portfolio, while offsetting volatility with bond ETFs such as AGG or TLT, is a prudent approach. Periodically reviewing weightings with a rebalancing calculator—taking profits on sharp rallies and adding on pullbacks—is the key to improving long-term returns.
Conclusion
Big tech's $650 billion AI investment further strengthens the semiconductor sector's long-term growth narrative. However, given that elevated expectations are already priced into valuations, valuation risk remains a real concern. Regularly reviewing semiconductor ETF weightings with a rebalancing calculator and maintaining overall portfolio balance with an asset allocation calculator is the prudent investment strategy for the AI era.
