Big Tech Earnings: The Trillion-Dollar AI Bet Faces Reality
- Oct 28, 2025
- 3 min read
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As Americaâs technology titansâMicrosoft, Alphabet, Amazon, and Metaâprepare to report their quarterly earnings this week, Wall Street is fixated on a single, trillion-dollar question: Is the artificial intelligence boom an unstoppable force or the next great bubble? Since the debut of ChatGPT, an AI-fueled rally has added approximately $6 trillion to Big Tech's market value. Now, investors are nervously looking for proof that the fundamentals justify the frenzy.
While strong revenue growth is expected, the true focus will be on capital expenditures, or "capex." This figure reveals how many billions are being poured into the AI arms raceâbuilding massive data centers, securing power, and buying up Nvidia's coveted chips. Spurred by privately-held OpenAIâs staggering $1 trillion in announced future infrastructure plans, the public hyperscalers are in a race to spend. Morgan Stanley analysts project total hyperscaler capex to grow 24% next year to nearly $550 billion.
Herein lies the paradox fueling the AI bubble fears: the returns on this historic spending spree remain profoundly uncertain. The four tech giants alone are expected to spend $400 billion on AI infrastructure this year. Yet, a widely cited MIT study found that of over 300 AI projects analyzed, only about 5% delivered measurable gains. Most projects, it seems, stall at the pilot stage, failing to integrate into real-world workflows or scale effectively.
This gap between hype and reality has insiders sounding alarms. Business leaders from OpenAI's Sam Altman to Amazon's Jeff Bezos have warned that tech stock valuations may have outrun their fundamentals. Andrej Karpathy, a former AI head at Tesla and OpenAI co-founder, put it more bluntly this month, stating the models are "not there" and calling the current state of the industry "slop."
Adding to the unease is a web of circular deals reminiscent of the 1990s dotcom boom. These include Nvidia's potential $100 billion investment in OpenAI, one of its largest customers, and Meta's recent $27 billion financing deal with a private-credit firm for a data center. As Ahmed Banafa, an engineering professor at San Jose State University, noted, when the same companies are both funding and relying on each other, "decisions may no longer be based on real demand or performance" but on "reinforcing growth expectations," increasing systemic risk.
Despite the froth, optimists argue that real value is emerging. They point to healthy balance sheets and strong cash flows, arguing the current low adoption of AI is not a forward indicator. "With greater spend and greater innovation in these models, the adoption is going to grow," said Eric Schiffer, CEO of investment firm Patriarch Organization. This weekâs reports are expected to show robust growth in the companies' cloud-computing units, the engine of the AI revolution.
According to Visible Alpha data, Microsoft Azure revenue is projected to have surged 38.4%, outpacing Google Cloud's 30.1% and Amazon Web Services' 18% growth. Microsoft has benefited from its tight integration with OpenAI, while Googleâs models have gained traction with startups. These Big Tech earnings reports will be scrutinized not just for these cloud figures, but for any sign that costs are slowing profit growth, as all but Microsoft are expected to post their weakest profit increases in 10 quarters.
CRUX
Ultimately, this earnings week is a referendum on strategy. Investors are no longer just rewarding hype; they are demanding a clear path from massive capital expenditure to tangible revenue and real-world adoption. The results will reveal which of the tech giants can successfully navigate the chokepoint of compute capacity and prove their multi-billion-dollar AI bets are more than just a magnificent bubble.
The bill for the future is coming due, and Wall Street is here to collect.
