Amazon's $200B AI Spend; US-Iran; Rio Tinto Drops Glencore | Horizons Middle East & Africa 2/6/26

Horizons Middle East & Africa - Broadcast Summary (February 2, 2024)

Key Concepts:

• Amazon CAPEX: Amazon’s planned $200 billion investment in data centers and equipment, causing a stock decline.
• Tech Sector Re-evaluation: A broader sell-off in tech stocks driven by Amazon’s spending and advancements in AI.
• Correlation between Bitcoin & Software: A notable correlation observed between the performance of Bitcoin and software stocks, suggesting Bitcoin is acting as a leveraged AI play.
• U.S.-Iran Nuclear Talks: Renewed negotiations between the U.S. and Iran, amidst geopolitical tensions and potential for military action.
• Global Oil Market Dynamics: Saudi Arabia’s oil price cuts indicating a potential supply-demand imbalance.
• Rio Tinto-Glencore Merger Failure: The collapse of merger talks between the two mining giants due to disagreements over valuation.
• Japanese Election: Upcoming lower house election in Japan and its potential impact on economic policy.
• Cape Town Short-Term Rentals: City’s plan to increase taxes on Airbnb and Booking.com properties to address housing affordability.

1. Market Overview & Tech Sell-Off

Global markets experienced declines, with the S&P 500 closing down 1.2% for the third consecutive day and the NASDAQ falling 1.6% – its largest drop since April. This downturn is largely attributed to Amazon’s announced capital expenditure (CAPEX) of $200 billion for 2024, sending its shares down 11% in extended trading. S&P futures were down 0.4% at the time of broadcast, having recovered from a larger earlier decline. The broader tech sector is undergoing a re-evaluation, particularly in light of advancements in Artificial Intelligence (AI). U.S. 10-year yields decreased to 4.18% due to weak U.S. labor market data (lowest since 2020). Brent crude oil was up 0.6%, with focus on the U.S.-Iran negotiations.

2. Amazon’s Investment & Market Reaction

Amazon’s $200 billion CAPEX plan (compared to $130 billion in 2025 and an anticipated $150 billion for 2026) spooked investors. CEO Andy Jassy justified the spending as necessary, primarily for the AWS unit, which saw revenue growth of 24% to $36 billion. However, Amazon’s forecasted operating income of up to $21.5 billion fell short of Wall Street’s expectations of $22.2 billion. This trend of significant CAPEX spending is also evident in other tech giants like Microsoft and Alphabet.

3. Anthropic’s AI Models & Disruption

Anthropic’s release of new AI models, including Opus 4.6 (capable of complex financial analysis) and a previous model targeting legal services, is contributing to market concerns about disruption. The release of the legal services model caused significant selling pressure in software stocks. Opus 4.6 can scrutinize company data and market information to generate detailed financial analyses, potentially replacing human analysts. This is causing concern for legacy business models in the financial services sector.

4. Bitcoin & Software Correlation

A striking correlation has emerged between the performance of Bitcoin and software stocks. This suggests that Bitcoin is not acting as a hedge or safe haven, but rather as a “supercharged cyclical play” and a leveraged bet on AI. As software stocks recalibrate, Bitcoin is also experiencing a decline, having fallen to $60,000 (a 50% drop from its peak).

5. Asian Market Performance

Asian markets are mirroring the U.S. tech sell-off. The KOSPI in Korea is down 2.8% (having been down as much as 5%), with smaller-cap tech companies facing the heaviest losses. Samsung and SK Hynix are down around 3%. The Hang Seng Tech index in China is in a bear market, down 0.5%. NIO, an EV stock, is bucking the trend with an 8% gain due to positive profit guidance and strong January vehicle deliveries. The Nikkei is performing well due to upcoming lower house elections.

6. U.S.-Iran Nuclear Talks & Geopolitical Risk

The U.S. and Iran are scheduled to meet in Oman for key nuclear talks. The situation is complex, with President Trump initially threatening regime change but now appearing open to negotiation. The U.S. intelligence community believes regime change is not a simple task. Iran is likely seeking concessions including the removal of all enrichment capabilities, which is a major sticking point. Recent Iranian provocations (drone flights near U.S. aircraft carriers, vessels near U.S. ships) are seen as tests of U.S. resolve. A U.S. strike on Iran is considered likely, but a significant oil price spike is not inevitable, depending on Iran’s response and whether it targets oil production/transportation.

7. Oil Market Dynamics & Saudi Arabia

Saudi Arabia has lowered the price of its Arab Light crude for Asian buyers to parity with the regional benchmark, the lowest level since late 2020. This signals a potential supply-demand imbalance and a bearish outlook for oil prices. A geopolitical premium of approximately $3 per barrel is currently priced into oil.

8. Rio Tinto-Glencore Merger Collapse

Merger talks between Rio Tinto and Glencore collapsed after failing to agree on a price. Glencore demanded at least 40% of the combined company, which Rio Tinto was unwilling to accept. This deal would have created the world’s largest mining company. BHP is seen as a potential bidder for Glencore.

9. Japanese Election & Economic Policy

Japan is holding a lower house election on Sunday. Prime Minister Fumio Kishida is hoping to capitalize on high public support and increase her coalition’s majority. The election is crucial for her agenda, including increased defense spending and a large supplemental budget. Markets are reacting with volatility in the yen and government bond yields.

10. Cape Town Short-Term Rental Regulations

Cape Town is planning to double taxes on short-term rentals listed on platforms like Airbnb and Booking.com to address rising housing costs and local resentment. The city is also enforcing stricter property tax regulations. This follows similar measures implemented in cities like New York, London, and Barcelona.

Notable Quotes:

• Deepak (Chief Economist, Commercial Bank of Dubai): “The reason we are selling off so much in AI related stocks is because AI seems to be working, not because it is not working.”
• Deepak: “If AI is indeed working, the hyperscalers know exactly what they are doing.”
• Annabelle Droulers (Bloomberg Asia Tech Correspondent): “$200 billion…completely blows it out of the water.” (referring to Amazon’s CAPEX)

Data & Statistics:

• Amazon CAPEX: $200 billion (2024) vs. $130 billion (2025) vs. $150 billion (anticipated 2026).
• S&P 500 Decline: 1.2% (third consecutive daily decline).
• NASDAQ Decline: 1.6% (largest drop since April).
• Bitcoin Decline: Down 50% from its peak.
• KOSPI Decline: 2.8% (down as much as 5%).
• Saudi Oil Price Cut: Price of Arab Light crude lowered to parity with regional benchmark (lowest level since late 2020).
• Cape Town Short-Term Rental Increase: Proposed tax increase of 135%.
• Cape Town Short-Term Rental Listings: More than double the listings of Amsterdam, New York City, and Hong Kong.

Conclusion:

The broadcast highlighted a period of market volatility driven by a combination of factors: significant capital expenditure announcements from tech giants, the disruptive potential of AI, geopolitical tensions surrounding Iran, and evolving regulatory landscapes in cities like Cape Town. The correlation between Bitcoin and software stocks suggests a shift in investor perception of cryptocurrency, while the failed merger between Rio Tinto and Glencore underscores the challenges of consolidation in the mining sector. The upcoming Japanese election and U.S.-Iran negotiations remain key events to watch in the coming days.