AI Spending Fears Test a Market Still Near Its Highs

The S&P 500 hit a fresh all-time high in August 2026, yet by October investors had shifted their attention to a single question: how durable is the artificial intelligence capital spending cycle? That is the core warning from Chris Puplava, Chief Investment Officer at Financial Sense Wealth Management, who argues the market's surface strength is hiding real stress underneath.

The numbers that frame his case are straightforward. An index at record highs in August. A market-wide pivot in October toward doubts about data center construction. And, on the other side of the ledger, $166 billion in corporate buyback authorizations in October alone — a potential cushion if selling pressure fades.

How did the market's weakness develop?

Puplava's account starts from a paradox. In August 2026, the economy and financial markets looked solid. The S&P 500 had just made a new all-time high, and there was little in the headline data to alarm investors. But, as he puts it, "beneath the surface, warning signs were emerging."

The most important of those signs concerns where the money has been going. AI capital expenditures — especially the construction of data centers — have been one of the main engines of corporate spending and, by extension, of stock market gains in technology and semiconductors. When investors started asking in October whether that spending would slow, they were effectively questioning the foundation of the market's leadership.

His concern is explicit: "One risk we are considering is whether the current reassessment of AI spending could develop into a broader unwinding of technology valuations."

That is the mechanism worth watching. A reassessment of AI spending is, on its own, a sector story. It hits chipmakers, data center builders, and the companies writing the biggest capex checks. But if the reassessment deepens, Puplava suggests it can spread — from a debate about individual projects into a broader repricing of technology stocks as a group.

In plain terms: the worry is not one bad quarter, it's a chain reaction.

Why do AI capital expenditures matter so much?

The article frames the question directly: "A central question is whether AI-related capital expenditures—and particularly data center construction—will slow materially."

The word "materially" carries the weight. Nobody in this debate expects AI spending to stop. The question is whether it slows enough to change the math for the companies doing the building and the suppliers selling into them. Data center construction is a physical, capital-intensive business. When it decelerates, the effects show up in orders, in semiconductor demand, and in the earnings expectations built into tech valuations.

For the broader market, this matters because technology has been the dominant weight in the indexes. A material slowdown in AI capex wouldn't just hurt a niche — it would pressure the sector that has done the most to drive the S&P 500's gains.

The stakes, in Puplava's framing, run beyond stock prices. He identifies a combination that could reinforce weakness: material slowing of AI capital expenditures, policy uncertainty after the midterm elections, and tighter credit conditions. If those trends persist together, he writes, they raise recession risks — not just portfolio losses.

What has kept the broader market resilient?

Here is the counterweight in Puplava's analysis. Even as most S&P 500 constituents declined sharply from their highs, the index itself has held up. His explanation: sector rotation.

Investors have been moving money out of technology and into defensive and value stocks. That rotation, he argues, has "helped the broader S&P 500 remain resilient, even as most constituents declined sharply from their highs."

That detail deserves attention. It means the index's apparent stability is not a sign that everything is fine. It means money is changing seats rather than leaving the theater. Most stocks in the index are well off their highs; the ones absorbing the inflows are simply masking that breadth problem at the index level.

His forward view on this point is conditional: "As long as investors continue rotating among sectors, the broader market may remain relatively resilient." The caveat — "as long as" — is doing real work in that sentence.

What could support stocks from here?

Puplava balances the risk picture with three factors that could prop up equities if selling pressure eases:

• Extremely negative CTA positioning. Commodity Trading Advisors, a class of systematic trend-following funds, are already positioned very bearishly. When positioning is this skewed to the downside, there is less room for further selling — and more fuel for a rally if the trend reverses, as those funds are forced to buy back in.
• Record corporate buyback authorizations. Companies authorized $166 billion in buybacks in October 2026. Buybacks put a direct bid under shares, and a record month of authorizations represents a large pool of future demand.
• Positive post-midterm seasonality. Historically, the period following U.S. midterm elections has tended to be favorable for equities, and Puplava counts that seasonal pattern as a source of support.

None of these guarantees anything. They are, in his construction, potential sources of demand — conditions under which selling pressure, if it eases, could find buyers waiting.

What happens next?

Puplava's scenario map has two branches. On the downside, a material slowdown in AI capex, combined with post-midterm policy uncertainty and tighter credit, could reinforce weakness in AI and semiconductor stocks and, if sustained, raise recession risks. On the upside, extremely negative CTA positioning, $166 billion in October buyback authorizations, and post-midterm seasonality could provide the demand that stabilizes equities.

The signal to watch, by his own framing, is the pace of data center construction. If AI-related capital expenditures hold up, the reassessment stays contained to a debate within tech. If they slow materially, the question becomes whether technology valuations unwind more broadly — and whether the sector rotation that has protected the S&P 500 so far keeps doing its job.