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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
Big Tech plans to spend hundreds of billions on AI this year, the industry leaders said this earnings season. In response, a stock sell-off followed as traders grew wary of the whole AI story. Looking for something safer, they went into energy stocks. Big Oil stocks, to be precise.
Last week saw a sharp drop in Big Tech stocks as traders sold off their holdings on fears that artificial intelligence was about to replace software. NVIDIA’s CEO Jensen Huang dismissed those fears, saying, “There's this notion that the tool industry is in decline and will be replaced by AI. You could tell because there's a whole bunch of software companies whose stock prices are under a lot of pressure because somehow AI is going to replace them. It is the most illogical thing in the world and time will prove itself.”
There are, however, other concerns related to the Big Tech sector that are making traders and investors turn increasingly to safer industries, namely oil and gas. Those concerns essentially come down to the spending plans of the tech giants, running at over $660 billion for this year alone. Amazon alone announced capex of $200 billion for 2026 on Friday, which was 50 billion higher than what traders expected. Meta said it would spend $135 billion this year, which was a nearly twofold increase on its 2025 capex, with most of the money to be spent on AI.
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While Big Tech is burning cash on data centers, chips, and power supply, Big Oil is quietly doing what it does best: extracting oil and gas, the latter incidentally essential for Big Tech’s AI buildout. The fact that peak oil demand warnings have grown less frequent after the International Energy Agency admitted oil is going to be around for a lot longer than 2030 also helped traders rediscover energy stocks.
As a result of these developments, U.S. oil and gas stocks are up a collective 17% since the start of the year, the Financial Times reported this month, citing data from Bloomberg. The stock gains helped push the market cap of Exxon, Chevron, and ConocoPhillips 25% higher over the past 12 months, the report went on, noting that European Big Oil also enjoyed a rise in stock prices, although a bit more moderate.
The FT noted in its report that the stock gains materialized despite a decline in international oil prices, which it saw as unusual and counterintuitive. The fact is, however, that even with lower oil prices, Big Oil is making money, and traders are being reminded that this is a good thing, while Big Tech’s artificial intelligence plans have yet to bear financial fruit.
It is a fact that the oil price slide from last year was substantial and that it affected the earnings of the supermajors and smaller players. However, it is also a fact that Big Oil remained profitable despite the price slide—and the IEA’s admission that oil demand could continue growing until 2050 at least helped traders and investors see markets in a new, more real-life light.
There is also another reason why Big Oil is getting more attractive. The supermajors have pretty reasonable debt levels, while Big Tech is borrowing big and about to start borrowing even bigger because those $660 billion have to come from somewhere, and debt markets are the obvious choice. Besides, Big Oil likes to pamper its shareholders with cash returns via buybacks and dividends, even if it needs to borrow to do that, as some analysts expect.
Currently, cash returns as a percentage of cash flow from operations for several supermajors sit at a comfortable 50%, CNBC reported recently, quoting a Quilter Cheviot analyst. To maintain that level amid weak international oil prices, Big Oil may need to borrow more, Maurizio Carulli predicted last October. Yet oil prices are actually higher now, driven by geopolitical events that suggest a supply disruption may be looming over oil markets.
Meanwhile, Big Tech will see shrinking cash flows this year because of its massive AI spending plans. Amazon may swing into negative territory there, with Morgan Stanley seeing its cash flow at minus $17 billion and Bank of America predicting it at minus $28 billion. Alphabet hiked its long-term debt fourfold last year, while analysts expect its free cash flow to slump by 90% this year. The same extent of free cash flow loss is expected at Meta, according to Barclays.
It is not that analysts are particularly worried about the state of the industry and, more specifically, the so-called hyperscalers segment. The banks still have “buy” ratings on Big Tech’s stocks. Yet it seems traders are more guarded and more careful about where they put their money. The jam tomorrow story does not appeal to everyone—especially when there is an industry that offers the jam today, as does Big Oil.
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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