When it comes to artificial intelligence, there appears to be no limit on how much companies are willing to spend. Tech titans have funneled billions of dollars into data center projects to build out their AI infrastructure, with the Stargate Project being the industry’s most ambitious endeavor in the United States. In fact, OpenAI alone has completed deals worth a total of $1 trillion in 2025. More capital is on the way, too, with AI funding making up nearly half of global venture funding this past quarter.
Is the AI Industry in a Bubble?
Circular deals where the main AI players exchange funds and resources could hint that only a few companies are driving growth, putting the industry on shaky ground. It’s not even clear if the billions of dollars companies have spent on AI will translate into long-term profits, raising fears that the industry may be in a bubble — although this is debatable, as bubbles can only be conclusively identified after they’ve popped.
Yet, some fear the most prominent AI players are merely passing around capital amongst themselves, inflating the industry’s overall value as part of an AI bubble that could send the market into a free fall if it pops. Nonetheless, these deals may encourage other investors to pump even more funds into AI companies, which has become a concern for John Kim, CEO of AI agent platform Sendbird and a general partner at VC firm Valon Capital.
“Here’s the math problem: $200 billion invested in AI needs to generate multiple trillion-dollar companies within five years for the economic model to make sense,” Kim told Built In. “This has historically never happened, usually taking multiple decades to achieve.”
While it’s still up for debate whether AI’s rapid expansion is a step toward its dominance or its demise, the industry’s increasingly lofty expectations have made it all the more necessary to question whether all this hype is too good to be true.
AI Leaders Are Spending Big, With Mixed Results
Tech giants made a splash in AI spending during the latter half of 2025, although not everyone saw the returns they were hoping for. Here’s how five of the biggest tech companies — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — performed based on their most recent quarterly earnings reports.
Alphabet
Alphabet reported that its year-over-year revenue increased to $102.3 billion in what was the company’s first-ever $100 billion quarter, with its AI infrastructure and generative AI solutions contributing to a 34 percent increase in Google Cloud revenue. Meanwhile, its capital expenditures fell between $91 billion and $93 billion. Google’s business remained intact in the wake of its antitrust case, enabling Alphabet to retain its revenue streams — a key factor that has made its AI ventures appear more sustainable and earned the favor of investors.
Google also has plans beyond its AI Overviews feature to remain competitive in the field, such as more widely distributing its seventh-generation tensor processing unit, integrating its Gemini model into Google Maps, its smart devices and other products, as well as ramping up its investments in AI startup Anthropic. The company will also likely need immense resources to fund its bold plan for converting satellites into solar-powered data centers.
Amazon
Amazon reported a 13 percent increase in net sales for the third quarter, bringing its sales to $180.2 billion and spurring a sharp spike in the company’s stock. Quarterly operating expenses were $162.8 billion, leaving Amazon with $17.4 billion in operating income. The company saw sizable gains in its AI initiatives, including its widely successful Trainum2 AI chip, Project Rainier compute cluster and Quick Suite agentic AI app.
At the same time, leadership announced that it would integrate AI to reorganize its workforce “with fewer layers and more ownership,” leading to 14,000 job cuts. While the decision has caused some uncertainty, investors’ perceptions of Amazon are likely to stay positive after Amazon Web Services locked in a multi-year, $38 billion partnership with OpenAI.
Microsoft
Microsoft reported raking in $77.7 billion in revenue, resulting in an operating income of about $38 billion after accounting for $39.7 billion in revenue and operating expenses. CEO Satya Nadella credited the company’s “planet-scale cloud and AI factory” with “driving broad diffusion and real-world impact.” However, the company’s stock took a slight dip after it was announced that there would be an increase in upcoming capital expenditures — likely due to Microsoft’s growing AI ambitions.
Microsoft is already well-positioned through its restructured deal with OpenAI and its move to boost its Edge web browser with a Copilot mode. Now, the company has allocated an additional $15.2 billion toward its investments in the United Arab Emirates, which put the AI industry on notice with its K2 Think language model. But a more daring plan could be the formation of a team to pursue “humanist superintelligence.” It’s unclear whether superintelligence can even be achieved, so this is a risky project that may cloud the company’s future outlook.
Apple
Apple also reported favorable numbers in its most recent quarter, accumulating roughly $70 billion in sales and operating costs, while generating $102.5 billion in net sales for a net income of $27.5 billion. There’s no doubt that the iPhone 17 helped Apple’s sales, but the company’s AI plans offer reason for optimism as well.
Although Apple didn’t mention artificial intelligence in its report and has generally fallen behind in this area, it might be ready for a comeback with a long-term AI strategy that centers its tech around intelligent, adaptive capabilities — effectively turning them into AI-first devices. And with Apple recently adopting Google’s Gemini model to upgrade Siri, major updates could be coming in the near future.
Meta
Meta posted third-quarter totals of $51.2 billion in revenue and $30.7 billion in expenses, resulting in $20.5 billion in operating income. In particular, the company views its AI glasses, progressing AI models and growing AI talent as reasons to be excited about the future. However, a one-time tax charge undermined Meta’s financial gains with a 9 percent share drop.
Even then, the company may have more pressing concerns, given its year of massive AI spending. Meta sank billions of dollars into its various data center projects and acquisitions, and millions on recruiting AI researchers to round out a new superintelligence team that has led to further restructuring and a hiring freeze. Not to mention the millions more it’s thrown at political lobbying efforts. In short, Meta may be acting out of sheer desperation to catch up with AI competitors, putting itself in a precarious position.
Still, Tech Companies Trail OpenAI in Spending
Of course, OpenAI remains the hottest name in tech. The company has been busy landing deals with Oracle, Nvidia and Broadcom, while adding startups like Statsig, Roi and Software Applications Incorporated to its portfolio. And OpenAI has shown no signs of slowing down, committing $38 billion in its deal with AWS and launching a joint venture in Japan with SoftBank Group. This is in addition to the $100 billion it already contributed to the Stargate Project to expand America’s AI infrastructure.
So, how exactly is OpenAI footing the bill? That’s a good question. The company only brought in $4.3 billion in revenue during the first half of 2025, and a Microsoft report revealed that OpenAI may have suffered $12 billion in losses from last quarter. It’s not surprising, then, that investor Brad Gerstner pointed out OpenAI’s more than $1 trillion in spending commitments, to which OpenAI CEO Sam Altman replied, “Enough.” Altman has since doubled down on OpenAI’s approach of committing to spend money it doesn’t have.
“We expect to end this year above $20 billion in annualized revenue run rate and grow to hundreds of billion by 2030. We are looking at commitments of about $1.4 trillion over the next 8 years,” Altman wrote in a post on X. “Obviously this requires continued revenue growth, and each doubling is a lot of work! But we are feeling good about our prospects there.”
The issue is much larger than OpenAI, though. Considering that many deals are limited to the most powerful AI companies — namely OpenAI — the entire industry is being propped by just a handful of players, inflating a bubble that appears to be on the verge of bursting.
Is an AI Bubble on the Horizon?
OpenAI’s many deals underscore an industry-wide trend that can be summed up in one word: Circularity. This refers to transactions where one company sends money to another company, which then invests those funds in the previous company’s products, services or other ventures. The problem is that these transactions have been confined to only the most valuable companies in the world, further concentrating resources in a handful of companies that are driving industry growth — regardless of whether there’s broader interest from other organizations and the general public.
These deals can then fuel excitement and convince investors to make costly decisions without much forethought. It’s this pattern of urging quick investments to secure immediate gains that might mean something is amiss, according to Kim.
“Investors are being given 48 hours to decide whether to invest tens of millions into a company. That time compression tells you everything about a potential bubble,” Kim said. “When your time horizon shrinks from long-term value creation to just the next fundraising cycle, you’re no longer a value investor.”
However, investors may be catching on to this strategy and hitting the brakes: AI stocks lost $1 trillion in value during the first week of November, reflecting waning confidence in the technology. After all, it’s still unclear whether AI will serve any meaningful purpose in the long run, with plenty of instances where it’s proven to be useless or even harmful. Unless leaders like Altman can convince investors to stick around for the long haul, it may be only a matter of time before the industry’s sky-high valuations come crashing back to Earth.
“When short-term investors move out, the demand shrinks drastically, signaling the burst of a bubble,” Kim said. “We must show AI has created real value before that happens to dampen any potential rise of skepticism in AI investments.”
Frequently Asked Questions
What does circular financing mean in the context of AI investments?
Circular investments are deals where one company receives funds from another company and then invests those funds in the latter’s ventures. In the AI industry specifically, OpenAI has signed such deals with Oracle, Nvidia and AWS. The problem is that the most powerful AI players have used this strategy to strengthen their AI capabilities, consolidating resources among a small number of companies.
Why are there fears that the AI industry might be in a bubble?
AI titans have completed circular deals with each other, making any industry growth misleading since only a handful of companies have been involved. In addition, companies are committing billions of dollars — around $1 trillion in OpenAI’s case — to a technology that still doesn’t have a clear purpose in the long run. This makes AI an especially risky bet that may spook many investors.
What could happen if the AI bubble bursts?
Google, Amazon, Microsoft and other tech titans have invested billions of dollars in AI projects. Given that these companies represent a sizable chunk of the stock market, an AI bubble bursting would mean trillions of dollars getting erased from the market. This crash would likely reverberate across various industries and hamper the entire economy.
