International oil prices nearing $120 are impacting global risk assets and putting pressure on tech stock valuations.
Market Risk Sentiment Heats Up
On Monday during Asian trading hours, a sharp rise in oil prices heightened global market risk aversion.
The Nasdaq 100 futures, dominated by tech stocks, fell about 2.32%, while the CBOE Volatility Index futures rose 7.28%.
Investors are concerned that rising energy prices could weigh on the U.S. economy through inflationary channels.
Tech Giants Face Dual Pressures
Tech companies face both demand pressures and the risk of rising costs.
On one hand, declining consumer confidence may weaken demand in the advertising market.
On the other hand, rising energy costs could increase costs for data centers, electricity, and infrastructure development.
Focus on Advertising and AI Investment
Internet companies' revenues are highly dependent on the advertising market.
Amazon's advertising revenue was about $21.3 billion in the fourth quarter of last year.
Meta Platforms' advertising revenue during the same period was about $58.1 billion, accounting for approximately 97% of the company's total revenue.
Meanwhile, tech giants are consistently increasing capital expenditure on artificial intelligence.
Meta plans to invest between $115 billion to $135 billion in AI infrastructure, while Amazon anticipates capital expenditures reaching approximately $200 billion by 2026.
AI Industry Chain Risks
The growth prospects of AI chip company NVIDIA are heavily reliant on data center investments by large tech firms.
If oil prices impact economic growth and lead to tighter corporate budgets, the AI investment cycle in the tech industry may face uncertainty.
