Big Tech CapEx Slowdown Driven by AI Memory Cost Pressures
Rising memory prices tied to AI infrastructure are squeezing margins at Meta and Microsoft, triggering capital spending pullbacks and market rotation.
Major technology companies are scaling back capital expenditures as soaring memory costs associated with artificial intelligence infrastructure squeeze profit margins, according to market analyst Larry McDonald.
Margin pressure forces spending cuts
McDonald, speaking on Fox Business's Mornings with Maria, explained that companies including Meta and Microsoft have acknowledged significant margin pressure stemming from the elevated cost of memory components required for AI systems. This financial strain is prompting these firms to slow their capital spending plans, marking what McDonald characterized as a period of "malinvestment" in the technology sector.
The issue centers on memory pricing, which has surged as demand for AI infrastructure has accelerated. Memory components—critical for training and running AI models—represent a substantial portion of the hardware costs associated with building out AI capabilities at scale.
Market rotation underway
The capital expenditure slowdown is contributing to a broader shift in market dynamics, with investors rotating out of technology stocks and into hard assets. This represents what McDonald described as a "historic shift" in the tech market, as the sector that has driven much of the recent bull market faces new headwinds.
The rotation reflects growing investor concern that the massive AI buildout by Big Tech may not deliver returns quickly enough to justify the infrastructure costs, particularly as memory pricing remains elevated.
Why it matters
This development signals a potential inflection point for the AI investment cycle. After months of aggressive spending on AI infrastructure, major technology companies are now confronting the financial reality of building these systems at scale. The margin pressure could slow the pace of AI deployment across the industry and reshape expectations for how quickly AI will generate returns. For investors, the shift suggests the multi-year tech rally may be entering a more challenging phase as companies balance innovation ambitions against profitability concerns.
These details were first reported by Fox Business during a June 26, 2026 segment of Mornings with Maria featuring market analyst Larry McDonald.
This is an original analysis by the Omega editorial team. Source reporting: AI Watch.
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