by Rahul Sharma, Indxx with Alan J Weissberger, IEEE Techblog

Introduction:

The ongoing wave of artificial intelligence (AI) infrastructure investment by U.S. mega-cap tech firms marks one of the largest corporate spending cycles in history. Aggregate annual AI investments, mostly for cloud resident mega-data centers, are expected to exceed $400 billion in 2025, potentially surpassing $500 billion by 2026 — the scale of this buildout rivals that of past industrial revolutions — from railroads to the internet era.[1]

At its core, this spending surge represents a strategic arms race for computational dominance. Meta, Alphabet, Amazon and Microsoft are racing to secure leadership in artificial intelligence capabilities — a contest where access to data, energy, and compute capacity are the new determinants of market power.

AI Spending & Debt Financing:

Leading technology firms are racing to secure dominance in compute capacity — the new cornerstone of digital power:

• Meta plans to spend $72 billion on AI infrastructure in 2025.
• Alphabet (Google) has expanded its capex guidance to $91–93 billion.[3]
• Microsoft and Amazon are doubling data center capacity, while AWS will drive most of Amazon’s $125 billion 2026 investment.[4]
• Even Apple, typically conservative in R&D, has accelerated AI infrastructure spending.

Their capex is shown in the chart below:

Analysts estimate that AI could add up to 0.5% to U.S. GDP annually over the next several years. Reflecting this optimism, Morgan Stanley forecasts $2.9 trillion in AI-related investments between 2025 and 2028. The scale of commitment from Big Tech is reshaping expectations across financial markets, enterprise strategies, and public policy, marking one of the most intense capital spending cycles in corporate history.[2]

Meanwhile, OpenAI’s trillion-dollar partnerships with Nvidia, Oracle, and Broadcom have redefined the scale of ambition, turning compute infrastructure into a strategic asset comparable to energy independence or semiconductor sovereignty.[5]

Growth Engine or Speculative Bubble?

As Big Tech pours hundreds of billions of dollars into AI infrastructure, analysts and investors remain divided — some view it as a rational, long-term investment cycle, while others warn of a potential speculative bubble.  Yet uncertainty remains — especially around Meta’s long-term monetization of AGI-related efforts.[8]

Some analysts view this huge AI spending as a necessary step towards achieving Artificial General Intelligence (AGI) – an unrealized type of AI that possesses human-level cognitive abilities, allowing it to understand, learn, and adapt to any intellectual task a human can. Unlike narrow AI, which is designed for specific functions like playing chess or image recognition, AGI could apply its knowledge to a wide range of different situations and problems without needing to be explicitly programmed for each one.

Other analysts believe this is a speculative bubble, fueled by debt that can never be repaid. Tech sector valuations have soared to dot-com era levels – and, based on price-to-sales ratios, are well beyond them. Some of AI’s biggest proponents acknowledge the fact that valuations are overinflated, including OpenAI chairman Bret Taylor: “AI will transform the economy… and create huge amounts of economic value in the future,” Taylor told The Verge. “I think we’re also in a bubble, and a lot of people will lose a lot of money,” he added.

Here are a few AI bubble points and charts:

• AI-related capex is projected to consume up to 94% of operating cash flows by 2026, according to Bank of America.[6]
• Over $75 billion in AI-linked corporate bonds have been issued in just two months — a signal of mounting leverage. Still, strong revenue growth from AI services (particularly cloud and enterprise AI) keeps optimism alive.[7]
• Meta, Google, Microsoft, Amazon and xAI (Elon Musk’s company) are all using off-balance-sheet debt vehicles, including special-purpose vehicles (SPVs) to fund part of their AI investments. A slowdown in AI demand could render the debt tied to these SPVs worthless, potentially triggering another financial crisis.
• Alphabet’s (Google’s parent company) CEO Sundar Pichai sees “elements of irrationality” in the current scale of AI investing which is much more than excessive investments during the dot-com/fiber optic built-out boom of the late 1990s. If the AI bubble bursts, Pichai said that no company will be immune, including Alphabet, despite its breakthrough technology, Gemini, fueling gains in the company’s stock price.

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From Infrastructure to Intelligence:

Executives justify the massive spend by citing acute compute shortages and exponential demand growth:

• Microsoft’s CFO Amy Hood admitted, “We’ve been short on capacity for many quarters” and confirmed that the company will increase its spending on GPUs and CPUs in 2026 to meet surging demand.
• Amazon’s Andy Jassy noted that “every new tranche of capacity is immediately monetized”, underscoring strong and sustained demand for AI and cloud services.
• Google reported billions in quarterly AI revenue, offering early evidence of commercial payoff.

Macro Ripple Effects – Industrializing Intelligence:

AI data centers have become the factories of the digital age, fueling demand for:

• Semiconductors, especially GPUs (Nvidia, AMD, Broadcom)
• Cloud and networking infrastructure (Oracle, Cisco)
• Energy and advanced cooling systems for AI data centers (Vertiv, Schneider Electric, Johnson Controls, and other specialists such as Liquid Stack and Green Revolution Cooling).

–>This new AI ecosystem is reshaping global supply chains — but also straining local energy and water resources. For example, Meta’s massive data center in Georgia has already triggered environmental concerns over energy and water usage.

Global Spending Outlook:

• According to UBS, global AI capex will reach $423 billion in 2025, $571 billion by 2026 and $1.3 trillion by 2030, growing at a 25% CAGR during the period 2025-2030.
  Compute demand is outpacing expectations, with Google’s Gemini saw 130 times rise in AI token usage over the past 18 months, highlighting soaring compute and Meta’s infrastructure needs expanding sharply.[9]

Conclusions:

The AI infrastructure boom reflects a bold, forward-looking strategy by Big Tech, built on the belief that compute capacity will define the next decade’s leaders. If Artificial General Intelligence (AGI) or large-scale AI monetization unfolds as expected, today’s investments will be seen as visionary and transformative. Either way, the AI era is well underway — and the race for computational excellence is reshaping the future of global markets and innovation.

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Footnotes:

[1] https://www.investing.com/news/stock-market-news/ai-capex-to-exceed-half-a-trillion-in-2026-ubs-4343520?utm_medium=feed&utm_source=yahoo&utm_campaign=yahoo-www

[2] https://www.venturepulsemag.com/2025/08/01/big-techs-400-billion-ai-bet-the-race-thats-reshaping-global-technology/#:~:text=Big%20Tech’s%20$400%20Billion%20AI%20Bet:%20The%20Race%20That’s%20Reshaping%20Global%20Technology,-3%20months%20ago&text=The%20world’s%20largest%20technology%20companies,enterprise%20strategy%2C%20and%20public%20policy.

[3] https://www.businessinsider.com/big-tech-capex-spending-ai-earnings-2025-10?

[4] https://www.investing.com/analysis/meta-plunged-12-amazon-jumped-11–same-ai-race-different-economics-200669410

[5] https://www.cnbc.com/2025/10/15/a-guide-to-1-trillion-worth-of-ai-deals-between-openai-nvidia.html

[6] https://finance.yahoo.com/news/bank-america-just-issued-stark-152422714.html

[7] https://news.futunn.com/en/post/64706046/from-cash-rich-to-collective-debt-how-does-wall-street?level=1&data_ticket=1763038546393561

[8] https://www.businessinsider.com/big-tech-capex-spending-ai-earnings-2025-10?

[9] https://finance.yahoo.com/news/ai-capex-exceed-half-trillion-093015889.html

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About the Author:

Rahul Sharma is President & Co-Chief Executive Officer at Indxx – a provider of end-to-end indexing services, data and technology products.  He has been instrumental in leading the firm’s growth since 2011. Raul manages Indxx’s Sales, Client Engagement, Marketing and Branding teams while also helping to set the firm’s overall strategic objectives and vision.

Rahul holds a BS from Boston College and an MBA with Beta Gamma Sigma honors from Georgetown University’s McDonough School of Business.

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References:

Curmudgeon/Sperandeo: New AI Era Thinking and Circular Financing Deals

Expose: AI is more than a bubble; it’s a data center debt bomb

Can the debt fueling the new wave of AI infrastructure buildouts ever be repaid?

AI spending boom accelerates: Big tech to invest an aggregate of $400 billion in 2025; much more in 2026!

Big tech spending on AI data centers and infrastructure vs the fiber optic buildout during the dot-com boom (& bust)

FT: Scale of AI private company valuations dwarfs dot-com boom

Amazon’s Jeff Bezos at Italian Tech Week: “AI is a kind of industrial bubble”

AI Data Center Boom Carries Huge Default and Demand Risks

Will billions of dollars big tech is spending on Gen AI data centers produce a decent ROI?

Dell’Oro: Analysis of the Nokia-NVIDIA-partnership on AI RAN

RAN silicon rethink – from purpose built products & ASICs to general purpose processors or GPUs for vRAN & AI RAN

Nokia in major pivot from traditional telecom to AI, cloud infrastructure, data center networking and 6G

Reuters: US Department of Energy forms $1 billion AI supercomputer partnership with AMD

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