Tech firms are spending hundreds of billions of dollars on advanced AI chips and data centers, not just to keep pace with a surge in the use of chatbots such as ChatGPT, Gemini and Claude, but to make sure they’re ready to handle a more fundamental and disruptive shift of economic activity from humans to machines. The final bill may run into the trillions. The financing is coming from venture capital, debt and, lately, some more unconventional arrangements that have raised concerns among top industry executives and financial asset management firms.

At Italian Tech Week in Turin on October 3, 2025, Amazon founder Jeff Bezos said this about artificial intelligence,  “This is a kind of industrial bubble, as opposed to financial bubbles.”  Bezos differentiated this from “bad” financial or housing bubbles, which  cause harm. Bezos’s comparison of the current AI boom to a historical “industrial bubble” highlights that, while speculative, it is rooted in real, transformative technology. 

“It can even be good, because when the dust settles and you see who are the winners, societies benefit from those investors,” Bezos said. “That is what is going to happen here too. This is real, the benefits to society from AI are going to be gigantic.”

He noted that during bubbles, everything (both good and bad investments) gets funded. When these periods of excitement come along, investors have a hard time distinguishing the good ideas from the bad, he said, adding this is “probably happening today” with AI investments.  “Investors have a hard time in the middle of this excitement, distinguishing between the good ideas and the bad ideas,” Bezos said of the AI industry. “And that’s also probably happening today,” he added.

• A “good” kind of bubble: He explained that during industrial bubbles, excessive funding flows to both good and bad ideas, making it hard for investors to distinguish between them. However, the influx of capital spurs significant innovation and infrastructure development that ultimately benefits society once the bubble bursts and the strongest companies survive.
• Echoes of the dot-com era: Bezos drew a parallel to the dot-com boom of the 1990s, where many internet companies failed, but the underlying infrastructure—like fiber-optic cable—endured and led to the creation of companies like Amazon.
• Gigantic benefits: Despite the market frothiness, Bezos reiterated that AI is “real” and its benefits to society “are going to be gigantic.”

• Sam Altman (OpenAI): The CEO of OpenAI has stated that he believes “investors as a whole are overexcited about AI.” In In August, the OpenAI CEO told reporters the AI market was in a bubble. When bubbles happen, “smart people get overexcited about a kernel of truth,” Altman warned, drawing parallels with the dot-com boom. Still, he said his personal belief is “on the whole, this would be a huge net win for the economy.”
• David Solomon (Goldman Sachs): Also speaking at Italian Tech Week, the Goldman Sachs CEO warned that a lot of capital deployed in AI would not deliver returns and that a market “drawdown” could occur.
• Mark Zuckerberg (Meta): Zuckerberg has also acknowledged that an AI bubble exists. The Meta CEO acknowledged that the rapid development of and surging investments in AI stands to form a bubble, potentially outpacing practical productivity and returns and risking a market crash.  However, he would rather “misspend a couple hundred billion dollars” on AI development than be late to the technology.
• Morgan Stanley Wealth Management’s chief investment officer, Lisa Shalett, warned that the AI stock boom was showing “cracks” and was likely closer to its end than its beginning. The firm cited concerns over negative free cash flow growth among major AI players and increasing speculative investment. Shalett highlighted that free cash flow growth for the major cloud providers, or “hyperscalers,” has turned negative. This is viewed as a key signal of the AI capital expenditure cycle’s maturity. Some analysts estimate this growth could shrink by about 16% over the next year.

• Underlying technology is real: Unlike purely speculative bubbles, the AI boom is driven by a fundamental technology shift with real-world applications that will survive any market correction.
• Historical context: Some analysts believe the current AI bubble is on a much larger scale than the dot-com bubble due to the massive influx of investment.
• Significant spending: The level of business spending on AI is already at historic levels and is fueling economic growth, which could cause a broader economic slowdown if it were to crash.
• Potential for disruption: The AI industry faces risks such as diminishing returns for costly advanced models, increased competition, and infrastructure limitations related to power consumption. 

Ian Harnett argues, the current bubble may be approaching its “endgame.” He wrote in the Financial Times:

“The dramatic rise in AI capital expenditure by so-called hyperscalers of the technology and the stock concentration in US equities are classic peak bubble signals. But history shows that a bust triggered by this over-investment may hold the key to the positive long-run potential of AI.

Until recently, the missing ingredient was the rapid build-out of physical capital. This is now firmly in place, echoing the capex boom seen in the late-1990s bubble in telecommunications, media and technology stocks. That scaling of the internet and mobile telephony was central to sustaining ‘blue sky’ earnings expectations and extreme valuations, but it also led to the TMT bust.”

Today’s AI capital expenditure (capex) is increasingly being funded by debt, marking a notable shift from previous reliance on cash reserves. While tech giants initially used their substantial cash flows for AI infrastructure, their massive and escalating spending has led them to increasingly rely on external financing to cover costs.

This is especially true of Oracle, which will have to increase its capex by almost $100 billion over the next two years for their deal to build out AI data centers for OpenAI.  That’s an annualized growth rate of some 47%, even though Oracle’s free cash flow has already fallen into negative territory for the first time since 1990.  According to a recent note from KeyBanc Capital Markets, Oracle may need to borrow $25 billion annually over the next four years.  This comes at a time when Oracle is already carrying substantial debt and is highly leveraged. As of the end of August, the company had around $82 billion in long-term debt, with a debt-to-equity ratio of roughly 450%. By comparison, Alphabet—the parent company of Google—reported a ratio of 11.5%, while Microsoft’s stood at about 33%.  In July, Moody’s revised Oracle’s credit outlook to negative from, while affirming its Baa2 senior unsecured rating. This negative outlook reflects the risks associated with Oracle’s significant expansion into AI infrastructure, which is expected to lead to elevated leverage and negative free cash flow due to high capital expenditures. Caveat Emptor!

References:

https://fortune.com/2025/10/04/jeff-bezos-amazon-openai-sam-altman-ai-bubble-tech-stocks-investing/

https://www.ft.com/content/c7b9453e-f528-4fc3-9bbd-3dbd369041be

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https://fortune.com/2025/09/19/zuckerberg-ai-bubble-definitely-possibility-sam-altman-collapse/

https://finance.yahoo.com/news/why-fears-trillion-dollar-ai-130008034.html