Stocks: Why that $2 trillion software wipeout didn’t derail the AI bull market

“The market is pricing in worst-case AI disruption scenarios that are unlikely to materialize over the next three to six months. Enterprise software remains deeply embedded across the corporate landscape, underpinned by multi-year contracts and high switching costs that provide a significant buffer against near-term displacement. Importantly, emerging evidence suggests that AI is more likely to be additive to software workflows in the near term rather than a substitute,” he told clients in a recent note.

Capex is going through the roof

There are good reasons to think that the “SaaSpocalypse” won’t show up any time soon: On their Q4 earnings calls, the big tech companies all disclosed that they were massively ramping up capital expenditures (“capex”) on AI. 

The “hyperscalers’” capex guidance for 2026 is up by 24%, $117 billion more than last year, according to Ohsung Kwon and his colleagues at Wells Fargo. They estimate that $1.3 trillion will be spent on building out AI facilities through 2027. Of that, $660 billion is planned for this year, according to the Financial Times.

“Hyperscalers have consistently invested more than what consensus had expected – over the [last 12 months], they grew capex 50 percentage points above what consensus had penciled in a year before,” Kwon and his team said. Here’s what those underestimations look like in charts:

AI will increasingly be debt-funded

Increasingly, the big tech companies are taking on debt to pay for that capex. Alphabet even issued a rare 100–year-long bond for $20 billion. Still, the level of debt-funded expansion remains below that of previous booms, Wells Fargo said.

“So far, hyperscalers have only funded 2% of capex since [the first quarter of 2024] with an increase in net debt, well below the prior investment cycles: 13% during Shale and 30% during Telecom,” Kwon et al said. “We tracked $243 billion of debt raised for data center development since the start of 2025, with $167 billion coming since the start [fourth quarter of 2025] alone.”

Bank of America’s Tom Curcuruto had a similar take: “We maintain our forecast of ~$140 billion of hyperscaler direct [debt] issuance for 2026, but risks are to the upside.”

All of that money will filter into the 10 big AI companies (OpenAI, Anthropic, etc.) and in turn get spent on real estate development, data center kit, and the power stations needed to supply AI with energy—which is likely to be good for stocks in those sectors.

All of this spending and building is a tailwind for stocks. Seventy-five percent of companies in the S&P 500 have reported fourth quarter earnings, and earnings per share across those companies is 12% higher than it was a year ago, according to both BofA and Wells Fargo. That’s 5% higher than the consensus estimate prior to the quarter, BofA’s Savita Subramanian told clients.

Here’s a snapshot of the markets ahead of the opening bell in New York this morning:

• S&P 500 futures were up 0.18% this morning. The last session closed up 0.47%. 
• STOXX Europe 600 was flat in early trading. 
• The U.K.’s FTSE 100 was down 0.31% in early trading. 
• Japan’s Nikkei 225 was up 2.28%. 
• China’s CSI 300 was up 0.11%. 
• The South Korea KOSPI was flat.
• India’s NIFTY 50 was up 0.32%.
• Bitcoin was at $69.2K.