AI Stocks Dispel Bubble Talk. Capital Spending Is Booming, With No End In Sight.
Five tech titans just sent a clear message to Wall Street: The artificial intelligence megatrend remains strong. All that talk about an AI bubble bursting and AI stocks crashing should be set aside – at least for now.
Meta Platforms (META), Microsoft (MSFT), Google parent Alphabet (GOOGL), Amazon (AMZN) and Apple (AAPL) all posted solid results this past week. All signaled that they plan to step up already-massive bets on the artificial intelligence megatrend. The Facebook parent’s big spender talk did spook Wall Street, but Meta Chief Executive Mark Zuckerberg underscored what appears to be a theme in the AI brawl: The opportunity is so huge that, as these companies see it, overspending is probably not going to be a problem.
“We keep on seeing this pattern where we build some amount of infrastructure to what we think is an aggressive assumption and then we keep on having more demand,” Zuckerberg said Wednesday on Meta’s Q3 earnings call. “My view is that rather than continuing to be constrained on capex … the right thing to do is to try to accelerate this.”
The acceleration among the hyperscalers means the money will keep flowing to Nvidia (NVDA), AMD (AMD), Broadcom (AVGO) and other AI chip and data center plays, as well as to power plants, heavy construction firms and many more companies. The AI ecosystem has grown to account for an enormous share of the stock market and growth in the overall economy. Continued strong investment should reassure investors that the market has room to run after recent gains carried the S&P 500 and Nasdaq to record highs.
IBD tech reporters Patrick Seitz, Reinhardt Krause and Ryan Deffenbaugh contributed to this report.
AI Stocks: Big Tech Earnings
Microsoft and Google reported strong September-quarter results, with Microsoft’s Azure cloud computing business and Google Cloud both outperforming. Meta earnings missed due to a huge one-time tax charge, but revenue beat.
Both Meta and Microsoft guided December-quarter revenue in line with consensus, while Microsoft also predicted that Azure growth will slow slightly to 37%.
Amazon reported third-quarter results above Wall Street views. Apple beat estimates for its fiscal fourth quarter on record iPhone and services revenue.
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Spotlight On AI Capex
The debate over whether an AI bubble is building centers on the scramble to build more powerful data centers capable of running AI systems. That construction spree has translated into strong demand for a wide range of tech hardware, from chips to server racks to networking gear.
The Big Tech companies confirmed this week that the trend will continue. Google reported capex of $24 billion in its September quarter, up 83% from the year-ago period. Microsoft recorded spending of $35 billion, up 74%, while Meta reported capex of $19.4 billion, more than double what it spent in the year-ago period.
Google and Meta raised capital spending targets for the full year. Meta expects “notably larger” capex in 2026, with overall expense growth outpacing revenue gains.
Microsoft exceeded fiscal Q1 capital spending expectations and expects fiscal 2026 capex growth to be steeper than in fiscal 2025.
Amazon reported $34.2 billion in cash capex in Q3 and has spent $89.9 billion this year, Chief Financial Officer Brian Olsavsky said on the earnings call. Amazon expects its cash capex to reach $125 billion for all of this year. “We expect that amount will increase in 2026,” Olsavsky said.
Apple plans to boost investments in AI, nudging operating expenses higher in the December quarter.
Surging AI Data Center Capex Seen Lifting These Stocks
Investment In Data Center Infrastructure
The cost of building and running these data centers is expected to be huge. Data centers capable of handling AI processing workloads are expected to require $5.2 trillion in capital expenditures, according to an April 2025 McKinsey & Company report.
That’s bound to have serious economic and stock market impact. Microsoft, Meta, Google and Amazon alone account for more than $11.5 trillion in overall market cap as of Friday morning. Add in Apple, Nvidia, Broadcom, Taiwan Semiconductor (TSM) and AMD and it’s over $24 trillion. That’s over 40% of the S&P 500’s market cap.
“When it comes to infrastructure, we are building a planet-scale cloud and AI factory, maximizing tokens per dollar per watt,” Microsoft CEO Satya Nadella said on the company’s earnings call. “We will increase our total AI capacity by over 80% this year, and roughly double our total data-center footprint over the next two years, reflecting the demand signals we see.”
Many other AI chip, hardware, infrastructure and data center plays rely on hyperscalers’ spending. Beyond that, AI is fueling cooling plays, heavy construction and a wide array of energy companies, even coal producers.
That’s why it’s not surprising that the AI spending boom has been the biggest positive catalyst for the U.S. economy in 2025, which is seeing scant job growth and manufacturing declines.
Big Tech Capex In The AI Era
Amazon
Google
Meta
Microsoft
Apple
FY25 e (bil)
119
87
71
65
13
FY24 (bil)
83
53
37
45
9.5
Growth
43%
64%
92%
44%
37%
Source: FactSet, company reports
Among AI Stocks, Meta’s ‘Noisy’ Results Raise Flags
But the latest Big Tech earnings reports also highlighted Wall Street’s uneasiness with the spending spree, despite the promises of unprecedented riches that AI is supposed to bring.
Meta’s report and the sell-off that followed underscored this. Compared to Google’s “clean set of Q3 results” that could “sustain the company’s (now) premium multiple over the near-term,” Meta’s “results have turned more noisy,” BNP Paribas analyst Stefan Slowinski said in a client note.
In explaining why Meta stock tanked 11.3% the day after its report, Evercore ISI’s Mark Mahaney told clients, “Meta announced a significant increase in its investment spend plans for 2026, both capital expenditures and total expenditures, as the company seeks to be the ‘AI Leader.'”
Chief Financial Officer Susan Li said in a news release that Meta expects “capital expenditures dollar growth will be notably larger in 2026 than 2025.” Total expenses will also “grow at a significantly faster percentage rate” in 2026, compared to this year. Zuckerberg has already committed to spending hundreds of billions on data centers and other computing infrastructure. Meta’s projected 2025 capex of $71 billion is already nearly double 2024’s total.
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Mark Zuckerberg’s AI Vision
Zuckerberg appears unfazed by investor worries, telling analysts he wants to establish Meta as the leading “frontier AI lab.” The company recruited away engineers from OpenAI and other top AI competitors earlier this year to establish a new research team focused on the concept of AI “superintelligence.”
“If superintelligence arrives sooner, we will be ideally positioned for a generational paradigm shift in many large opportunities,” Zuckerberg said. “If it takes longer, then we’ll use the extra compute to accelerate our core business, which continues to be able to profitably use much more compute than we’ve been able to throw at it.”
There can be a “very worst case,” Zuckerberg noted: “That we effectively have just pre-built for a couple of years. In which case, of course, there would be some loss and depreciation, but we’d grow into that and use it over time.”
That’s what worries some analysts. Morgan Stanley’s Brian Nowak told clients, “To be clear, we don’t think anything is broken with Meta’s core platform improvements” and other parts of its business. “The challenge in the near term is revisions and estimates heading lower” as higher operating expenses hit earnings estimates.
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Amazon Web Services Roars Back
While Meta’s spend-whatever-for-AI posturing sent its stock tumbling, Amazon surprised Wall Street — in a good way. The closely watched Amazon Web Services cloud business reported revenue of $33 billion, up 20.2% from a year earlier. That topped consensus for $32.4 billion. The stock has struggled in 2025 from Wall Street worries that Amazon is losing market share to rivals Google and Microsoft.
The Amazon report puts to rest the debate on how the tech behemoth’s cloud business is doing. Analysts have been debating when AWS growth could reaccelerate back to above 20%. Most did not expect Amazon to reach that growth level before 2026, according to FactSet data.
“We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business,” CEO Andy Jassy said in a news release. “AWS is growing at a pace we haven’t seen since 2022. We continue to see strong demand in AI and core infrastructure, and we’ve been focused on accelerating capacity — adding more than 3.8 gigawatts in the past 12 months.”
AI Spotlight Also Shines On Nvidia
The AI spotlight this past week wasn’t just on the five tech titans. Nvidia, which reports results next month, also made waves by announcing new initiatives to bring chip manufacturing to the U.S. The chip behemoth also offered what sounded like an upbeat guidance.
“Did Jensen just soft-guide for $300 billion plus in datacenter revenue next year?” Bernstein Research analyst Stacy Rasgon wrote. In a client note, Rasgon argued that Nvidia appeared to be projecting “well over $300 billion” in data center revenue, higher than the Wall Street estimate of roughly $258 billion.
Nvidia stock rallied Wednesday, becoming the first company to reach a $5 trillion market cap. Nvidia’s market valuation was $4.92 trillion as of Friday’s close.
Other Stocks Playing The AI Megatrend
Meanwhile, signals were mixed from the AI megatrend’s supporting cast as the earnings season kicked off.
Vertiv Holdings (VRT), which provides data center infrastructure products and services critical for AI, just reported a “very strong quarter.” Vertiv CEO Giordano Albertazzi told IBD that his team was “very optimistic about the trajectory for the future.”
AI hardware play Celestica (CLS) and data center cooling name Comfort Systems (FIX) spiked recently on their booming earnings.
But Super Micro Computer (SMCI), which makes and designs AI hardware, guided lower on quarterly sales, saying some customers have postponed deliveries.
On Oct. 27, wireless chip giant Qualcomm said it will start making semiconductors for AI data centers, challenging Nvidia and AMD. The news sparked a rally in Qualcomm stock.
Tech Alliances Form Over AI
The earnings season also began with big news on the powerful alliances emerging in the battle over AI.
Last week, Alphabet stock got a big lift from news that Google’s cloud business could add Anthropic, the AI powerhouse and OpenAI rival, as a client. The report also lifted Broadcom, on news that the Anthropic deal means more business for the AI processors it designed with Google.
On Tuesday, OpenAI largely dispelled the notion of a serious rift between the startup and Microsoft. The San Francisco-based AI pioneer announced a reorganization that established Microsoft as a major shareholder and partner.
The OpenAI Question
A good deal of the AI debate has focused on OpenAI, a critical player in the megatrend. The startup unleashed the AI craze with the launch of ChatGPT three years ago. The tech industry is watching its aggressive expansion of its infrastructure.
“Every meeting with investors of late has one main topic — OpenAI,” Melius Research analyst Ben Reitzes said in an Oct. 22 note. “Never has there been a private company setting the agenda like this for all of Big Tech.”
Some analysts believe there’s simply too much money flowing into a trend whose near-term direction remains fuzzy.
Where Are AI Stocks Heading?
“We’re not here to dispute price tags, though we get it,” D.A. Davidson analyst Alexander Platt wrote in an Oct. 24 note. The AI megatrend now features “eye-watering commitments that’ll require trillions in capex, and the obvious point that OpenAI can’t self-fund their needs with near-term revenues.”
Reitzes also focused on OpenAI’s outsize role in the battle over AI.
“There are doubts around their ability to raise all the money, find the power and execute a massive revenue ramp needed to fund their ambitions,” he wrote. CEO Sam Altman, he speculated, “must be thinking there is at least $1T in revenue for himself in the 2030s. Sam, we are rooting for you.”
AI Stocks: Bubble Debate Continues
But the debate over an AI bubble is not over.
On Tuesday, Microsoft founder Bill Gates warned of a repeat of the “internet bubble,” telling CNBC, “There are a ton of these investments that will be dead ends.”
If hyperscalers don’t see a strong return on investment, they may eventually rein in their massive AI capex bets. In that scenario, the riptide effect through the AI ecosystem, as well as the broader stock market and overall economy, could be severe.
But many analysts remain upbeat, led by AI’s top Wall Street cheerleader, analyst Daniel Ives of Wedbush.
“While the bears will continue to yell ‘AI Bubble’ from their hibernation caves, we continue to point to this tech cap-ex supercycle that is driving this 4th Industrial Revolution into the next few years,” he told clients in a note. “While there will be some knee-jerk reaction negative for shares of Meta on the higher cap-ex forecast into 2026, this is the right move and overall bullish not just for Meta but the overall tech space with Nvidia and AMD front and center beneficiaries.”
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已发布: 2025-10-31 20:28:00
