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Investing.com -- BCA Research says the risk has risen that markets are entering a “Metaverse Moment,” a phase where investors start punishing AI companies for raising capital spending.
Amazon, Google, Meta, Microsoft and Oracle are on track to hold roughly $2 trillion of AI-related assets by 2030, which would imply about $400 billion in annual depreciation if those assets last five years.
That figure exceeds the combined trailing earnings of the group today, underscoring the scale of investment the market is being asked to absorb.
Analysts say justification for such spending is becoming shakier as LLMs may deliver fewer productivity gains than hoped.
Meta’s former AI chief, Yann LeCun, has publicly questioned whether current models can generate new knowledge which is a necessary requirement for the kind of transformative outcomes that would validate today’s capex boom.
Some studies even show that AI tools can slow experienced programmers.
BCA pushes back against the idea that early leadership in AI confers major strategic benefits. Network effects are limited, scaling is expensive, and much of the technology can be replicated.
AI is more like the airline industry, that has high capex, commoditised, and hostile to durable first-mover advantage.
Recent market action suggests sentiment may be turning. Meta shares are down almost 20% from August highs. Oracle has lost about 40% from its peak, and credit spreads for both Oracle and CoreWeave have widened sharply. BCA says these are early signs that markets may already be rejecting aggressive AI spending.
While a December rate cut would help cushion markets, BCA’s fixed-income team believes the probability of the Fed holding steady is higher than current pricing implies.
A hawkish surprise could trigger a broader risk-off move, especially with global data softening across manufacturing, trade and European activity.
BCA recommends a modest underweight to equities, maintaining a 57% global equities allocation in its GIS FullView Portfolio versus a 60% benchmark. The firm will reassess the stance in early December, with a bias toward further reducing exposure.