Quick Take Big Tech’s 2026 capital spending plans have blown past expectations , sparking a sharp market reaction. Investors still believe in AI — but they now want clear proof of returns , not just long-term promises. The CapEx Shock Across recent earnings, mega-cap tech companies pushed 2026 CapEx from “already massive” to “historically extreme” : Meta Platforms : US$115–135B vs US$110B consensus Stock jumped ~10% initially, but gains faded → investors want evidence, not AI rhetoric Microsoft : US$140–150B vs US$109B consensus Stock fell ~10% → ROI timing now under scrutiny Alphabet : US$175–185B vs US$115B consensus Shares slipped as markets adjusted to a more capital-intensive Google Amazon : ~US$200B vs US$146B consensus Stock dropped ~11% after-hours on cash flow concerns What Investors Are Really Worried About This is no longer about believing in AI — it’s about financial optics and timing . Key Market Fears CapEx is rising fa...
Quick Summary
BYD has lost over US$60 billion in market value since May amid a sharp sell-off
China EV demand is cooling faster than expected, with subsidies fading
Rising battery and chip costs are crushing margins
Investors fear widespread earnings downgrades across the sector
What’s Happening
Shares of BYD Co have come under heavy pressure, with Hong Kong-listed stock down about 7% this week following weak sales data. The decline extends a months-long sell-off that has erased more than US$60 billion in market capitalisation.
The rout has spilled over to other Chinese EV names, amplifying concerns over the sector’s profitability and growth outlook.
Demand Is Cooling — Fast
Investors were already bracing for slower growth in 2026 as government subsidies were reduced, but the pace of the slowdown has surprised the market.
BYD January domestic sales: 109,569 units, ~50% lower YoY
XPeng: Deliveries down over 30%
Morgan Stanley expects Q1 volumes to fall 30%–40% from the December quarter for most local automakers
Key concern: Even market leaders are no longer insulated from weak consumer sentiment.
Cost Inflation Adds to the Pain
At the same time, EV makers are being squeezed by surging input costs:
Lithium prices have more than doubled in three months
Copper and aluminium prices have surged
Memory chip shortages are pushing up costs for smart vehicle components
Analysts estimate additional costs of US$1,000 or more per vehicle for some models.
While BYD is relatively better positioned due to its in-house supply chain, peers such as Li Auto and Nio are seen as more vulnerable.
Investor Sentiment Turns Dark
According to CLSA, investor sentiment is “extremely negative”, with fears of large-scale earnings downgrades in 2026.
Bearish bets on EV stocks within the Hang Seng Tech Index have climbed sharply since November, even as the broader market held up better.
Any Bright Spots?
Exports remain a key support, helped by improving trade ties with Canada and the EU
EV makers are exploring AI, robotaxis and advanced driver-assistance systems as longer-term growth drivers
Valuations have eased — BYD trades at ~15x forward earnings, below its three-year average
Still, many fund managers say it’s too early to bottom-fish.
Bottom Line
BYD’s sell-off is not just a company issue — it reflects a structural reset for China’s EV industry.
With demand weakening, costs rising, and margins under pressure, investors are bracing for a tougher earnings cycle ahead. Until clarity emerges, caution is likely to dominate sentiment toward Chinese EV stocks.
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