Post US Elections: Investors Question AI Boom As Global Tech Stocks Tumble

(MENAFN- Khaleej Times) As global stock markets fell following a rout in US tech stocks, after the Democrats' midterm victory led to fears of a slowdown in the AI industry, some investors are questioning the AI boom as US spending and rising debt put the industry's future under scrutiny.

A fierce sell-off erased about $2.5 trillion from the Nasdaq 100 on Thursday, followed by sharp falls in Asian stock markets on Friday morning. The dip also reached London. The question now is: How long can investors keep paying for profits that have yet to arrive?

Recommended For You

“Investors have paid for years of exceptional growth before that growth has been delivered,” Rayad Kamal Ayub, managing director of UAE -based Rayad Group, told Khaleej Times on Friday.

He noted:“The danger is that a company can grow, sell more products, and still disappoint shareholders because the price demanded something extraordinary.”

Stay up to date with the latest news. Follow KT on WhatsApp Channels.

The S&P 500 fell 4.4 per cent in its worst session since April 2025. Ayub noted:“A lower share price does not automatically make a stock cheap,” Ayub said.“I would first ask whether the earnings outlook has changed. If borrowing costs rise and customers delay orders, Thursday's valuation may no longer tell you very much.”

“AI does not have to fail for investors to lose money,” underscored Ayub, noting:“Competition can bring prices down while the technology improves. That is good for the customer, but it can be painful for a shareholder who bought on the assumption that high margins would last.”

Edwin Mata, co-founder and CEO of Brickken, emphasised measurable benefits. He said:“One of the AI stocks I'd look for could be a software company whose customers already use it to run their business.

“Take accounting software. If it can reconcile most invoices automatically and send the exceptions to a person who can resolve them, the customer can measure what that saves. The investment question is how much of that value the software company can keep once its competitors offer the same feature,” he added.

Nathaniel Norman, founder of Aurelian Labs and Co-GP of Aurelian Ventures, for his part, highlighted reliance on future fundraising.

“The questions I ask is what happens if the next round of funding is more expensive, incomplete or does not arrive? Interest continues even when a project is delayed. Even a promising business can become a difficult investment when it hinges on successful future funding rounds for liquidity and valuation.”

Jung Kyu Kim, director at FV Capital, also questioned the resilience of funding plans.“I would like to know what will happen if the next funding round costs more, or fails to materialize?”

“Interest payments do not stop when a project is delayed. Even a promising business can become a difficult investment,” Kim explained.

Nick Smith, founder of Foundation Ventures, a growth advisory firm for Web3, AI and technology companies, raised similar concerns. He shared:“The key question is the next round of financing. What if it fails to materialize? Interest payments will continue even when a project is delayed, potentially turning an otherwise promising business into a risky investment.”

Building data centres

Norman noted:“A data centre building may last decades, but the equipment inside it faces a different timetable. I would want to see the replacement cost and the verified compute bill of materials (VCBOM), rather than assume today's margins will survive the next generation of chips.”

Mata added contract renewals deserved equal attention.“With AI infrastructure stocks, I pay attention to two dates. When does the customer's contract end, and when will the equipment need replacing? A data centre can be fully booked today and still face a difficult renewal if a rival can offer the same computing power for less. For shareholders, the cost of winning that next contract matters as much as the revenue announced on the first one.”

Kim, for his part, drew a distinction between buildings and the equipment they house.“A data centre building can last for decades, but its equipment follows a different replacement cycle. It is vital to examine the replacement bill before assuming today's margins will hold up when the next generation of chips arrives.”

Ayub further explained:“Investors should not confuse a long lease on a building with a long earning life for the machines inside it. The test is whether the business can replace those machines, keep its customers and still generate cash for shareholders.”

Given the current market situation, Ayub pointed out:“The risks extend beyond the American chipmakers. Memory suppliers, equipment manufacturers and contractors all depend on somebody continuing to spend. If projects are postponed, those businesses can feel the impact even when demand for AI services keeps growing.”

Ayub also cited electricity supply, grid connections, construction delays and the need for reliable results as constraints on expansion.

The internet boom showed that essential infrastructure can still leave investors with losses. Today's profitable technology leaders offer a stronger foundation,” added Ayub, underscoring:“I would not dismiss the whole sector. There will be valuable businesses here. But a compelling technology story cannot excuse any price. Before buying the fall, I would want evidence that the business can fund itself and earn a return without everything going perfectly.”

ALSO READ

After US Democrats' win, investors remain wary of AI spending, debt, trade policies US midterms 2026: How gold, oil, US dollar and AI stocks could react Massive AI borrowing binge rattles US markets, investors

MENAFN06112026000049011007ID1111927101