American tech giants are heavily investing in artificial intelligence, but investor reactions are mixed. While the companies anticipate significant profits from their AI ventures, concerns are emerging about the sustainability of these massive expenditures and their potential impact on stock prices.

Last quarter, Microsoft, Meta, and Alphabet collectively invested nearly $80 billion in data centers and AI model improvements, with plans for further increases. However, these announcements triggered a drop in stock prices for Microsoft and Meta, with Meta experiencing a decline of almost 10 percent.

Analysts suggest that investors are questioning the immense financial commitment, even though they acknowledge the strategic importance of AI investments. Meta, for instance, allocated nearly $20 billion to AI last quarter, representing over two-thirds of its revenue during the same period. Microsoft devoted more than three-quarters of its revenue to AI-related initiatives and intends to double its data center capacity within two years due to rising demand.

In contrast, Alphabet, Google’s parent company, instilled greater confidence by spending approximately $24 billion on AI, roughly half of its available income. The company also achieved a record quarterly turnover of $100 billion, leading to a 7 percent increase in its share price.

The tech companies are fueling demand and stock prices for chip manufacturers like Nvidia. Some analysts express concern about the circular flow of investment money within the AI sector, citing Nvidia’s potential $100 billion investment in OpenAI, which relies on Nvidia’s chips. Moreover, Microsoft, a major OpenAI shareholder, is also a significant Nvidia customer. The circular investments raise fears that stock prices are being artificially inflated, potentially creating a bubble.

Despite these concerns, optimism remains high, with stock exchanges worldwide reaching record levels. According to Jean-Paul van Oudheusden, a market analyst at eToro, the collective message from Microsoft, Alphabet, and Meta is clear: “The AI race requires deep pockets and patience.”