Big Tech's rising AI investments show market bubble 'still has a good ways to go'

Big Tech firms’ increasing investments in artificial intelligence show that even if the stock market is in a bubble, equities still have room to run higher before it bursts.

Last week, Amazon (AMZN), Alphabet (GOOG, GOOGL), and Meta (META) hiked their capital expenditure forecasts for their 2025 fiscal years, while Microsoft (MSFT) reported higher-than-expected spending for the first quarter of its 2026 fiscal year.

“We’re still in such a massive growth phase that the bubble still has a good ways to go before we’re at risk of the massive correction,” said Futurum Group analyst David Nicholson.

Amazon said it expects to see its full-year capex hit $125 billion, up from its previous outlook of $118.5 billion. Alphabet lifted its guidance for expenditures for the third straight quarter to $92 billion at the midpoint from $85 billion. Meta also upped its capex forecast range for the third time this year to $71 billion at the midpoint from $69 billion.

Meanwhile, Microsoft reported capital expenditures of roughly $35 billion for its fiscal first quarter, ahead of the $30 billion expected by analysts tracked by Bloomberg. The company said its spending will rise at a faster pace in the 2026 fiscal year, which ends in June, than it did in 2025.

That spending doesn’t even fully capture how much Big Tech is spending on AI overall. In addition to capex, some companies’ operating expenditures are going to third-party AI cloud providers as they rush to meet AI demand while building out their own data centers. Microsoft and Meta, for example, are customers of AI data center provider CoreWeave (CRWV).

Investors are continuing to bet that the rising costs for Big Tech are beneficial for the AI ecosystem and an indication that each company is staying competitive with its rivals, for the most part. That optimism is lifting stocks. Shares in Amazon reached an all-time high last week following the company’s results, and Alphabet stock also jumped.

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But in cases where investors questioned tech firms’ fundamentals, stocks showed a less favorable reaction. Microsoft shares fell slightly to mirror a broader market downturn because its Azure cloud revenue was slightly below investors’ super high expectations, analysts said. Meta was an outlier, suffering a steep loss in its stock price as investors expressed doubts over the strength of its AI strategy relative to its peers and its mega-high spending.

Analysts told Yahoo Finance that investor confidence in Big Tech’s AI push remains strong because, with the exception of Meta — which raised $30 billion in debt through a bond sale last week — most companies continue to fund AI projects with healthy cash flows from their core businesses while also beginning to monetize their investments. That progress has helped offset concerns about soaring expenses.

”We still have the most profitable companies on earth able to spend from their own pocketbook,” said Bokeh Capital Partners analyst Kim Forrest.

Alphabet said AI brought in billions of dollars for its Google Cloud segment and that a recent slew of AI-related deals helped drive its backlog, or the future value of its customer commitments, to roughly $158 billion, up from $86.8 billion in the year-ago period. Amazon stock surged on Friday after the tech giant said its cloud segment, Amazon Web Services, reported revenue ahead of expectations, partly driven by AI. The company said its backlog jumped to $200 billion from $164 billion the previous year. Microsoft’s Intelligent Cloud revenue of $30.9 billion, which includes Azure sales, was above expectations of $30.2 billion.

But the return on Big Tech’s AI investments remains unclear in the long run, some analysts worry.

“It’s impossible to know,” Forrest said.

Part of the concern going forward is that depreciation will begin to dig into companies’ profits. The chips that firms bought a few years ago from Nvidia are no longer as valuable as they were at the time of their initial investment. Alphabet CFO Anat Ashkenazi said the company saw a “significant increase in depreciation expense” in the third quarter that would continue to pressure its profit margins. Amazon and Meta also noted rising depreciation costs in their latest quarterly reports.

” This is going to impact all these companies in a huge way,” said D.A. Davidson analyst Gil Luria. “When you see them all doing layoffs or curtailing employee growth, it’s because they have to balance the huge drag on margins that the depreciation represents.”

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.

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