Big Tech’s AI Capex Surge and the “AI Bubble” Debate

Signals and Strategy: Connecting the Macro Pulse to Business Insight

For October 27th – 31st, 2025

By: Apoorva Kuppa, The Quinnipiac University Global Economics Research Team

Photo by BoliviaInteligente on Unsplash

Key Points

• On Wednesday, the Fed cut rates by 25 basis points as major tech firms raised capital expenditures tied to AI and data infrastructure.

• Meta, Alphabet, Amazon, Microsoft, and Apple reported double-digit increases in AI-related spending.

• Debate continues over whether this rapid investment cycle signals sustainable growth or early signs of an AI bubble.

Market Context

The Federal Reserve’s recent rate cut of 25 basis points coincided with a busy earnings week for Big Tech. Companies across the sector reported higher capital expenditures focused on artificial intelligence and cloud infrastructure. In theory, lower interest rates combined with strong private-sector investment should encourage more business growth and stimulate the economy by making borrowing and large projects more affordable. Recent stock performance helps illustrate how markets are digesting these announcements.

(Source: Yahoo Finance and own calculations. Stock prices indexed to 0% at the start of the period.)

Over the past five days, stock performance among major tech firms has been mixed. META (Blue) fell sharply, declining about 13.5%, while MSFT (Red) dipped 2.6%. In contrast, AMZN (Green) rose 8.6%, GOOG (Orange) increased 4.4%, and AAPL (Purple) rose 1.1%. META’s steep drop stands out compared to the relatively moderate movements of the other companies.

Sector Spotlight

Tech and AI

Big Tech is still going all-in on AI infrastructure. Meta, Microsoft, Amazon, Apple, and Alphabet all reported big jumps in capital spending this earnings season. Alphabet raised its 2025 forecast to between $91 and $93 billion (up from $85 billion), while Microsoft’s spending climbed 74% to $34.9 billion. Meta nearly doubled its year-over-year outlay to $19.37 billion, and Amazon expects to hit $125 billion in 2025 with even more planned for 2026. Even Apple, which isn’t a major cloud player, said it’s increasing AI-related investments.

Markets, though, reacted with mixed feelings. Meta’s stock tumbled after its announcement, and analysts questioned how these massive AI bets will turn into real profits. Some remain optimistic, with UBS and CFRA both expressing confidence in Google and Meta’s strategies, but investors are keeping a close eye. Sustaining this pace of spending will depend on continued demand and innovation, which is why talk of a possible “AI bubble” is starting to surface.

Business and Strategic Implications

An AI bubble, in economic terms, happens when asset prices and investments rise far beyond what’s supported by actual profits or productivity, usually because of hype and cheap borrowing. Federal Reserve Chair Jerome Powell disagreed with the idea that today’s AI boom looks like the dot-com bubble. He pointed out that today’s major tech firms have real business models and profits, calling AI’s buildout “a genuine engine of U.S. growth.” Powell also said this wave of investment is showing up in the real economy through data centers, equipment, and infrastructure, which could give GDP growth a noticeable boost over the next year.

Still, some analysts warn that the Fed’s current monetary policy could unintentionally fuel speculation. According to Investopedia, low interest rates make it easier to take risks and can keep bubbles going longer. Experts like Jeff deGraaf say it’s still too early to call this an AI bubble, but the growing dominance of the “Magnificent Seven,” which now make up 35% of the S&P 500, along with high price-to-earnings ratios, feels familiar to past speculative periods.

Strategic Note for PMs:

For product managers and strategists, this moment shows that AI isn’t just an emerging trend anymore. Instead, it’s becoming a full-on infrastructure race. The focus is moving from experimentation to monetization, so PMs should pay attention to how big platform investments in things like cloud and model APIs affect costs, capabilities, and competition. Knowing where we are in this cycle can help identify which innovations are built to last and which might just be hype.

Sources

Yahoo Finance. “Big Tech keeps splurging on AI.” October 31, 2025.

Yahoo Finance. “Powell says unlike dotcom boom, AI surge is grounded in profits.” October 31, 2025.

Investopedia. “How the Federal Reserve Could Inflate or Pop an AI Bubble.” October 31, 2025.