What is an AI bubble? Is this a real thing or just a Hype?

The world’s biggest technology giants — Alphabet, Microsoft, Amazon, and Meta — are preparing to announce their quarterly earnings for the July–September 2025 period.

Investors around the world are watching closely, hoping these reports will reveal whether the ongoing artificial intelligence (AI) frenzy represents a true revolution or the beginnings of another tech bubble. 

Over the past two years, AI has been hailed as the forthcoming great frontier of innovation, promising to transform industries and boost productivity. But behind the excitement, a growing number of analysts fear that the massive investments pouring into AI — from multi-billion-dollar data centers to experimental models — may not yield returns fast enough to justify the soaring valuations. 

Skyrocketing Spending, Limited Returns 

According to an MIT study of 300 AI projects, only 5% delivered meaningful gains, while most struggled to move beyond the conceptual stage. Yet, despite these sobering numbers, tech companies are projected to spend $400 billion this year alone on AI infrastructure and cloud computing. 

Even insiders are expressing concern. Andrej Karpathy, co-founder of OpenAI, recently commented, “The models are not there yet. The industry is pretending this is amazing — and it’s not.” 

Web of Circular Deals Raises Questions 

Adding to investor unease is a growing web of circular investments among tech giants like  

• Nvidia 

• OpenAI 

• AMD 

• Meta

For instance, Nvidia has reportedly invested $100 billion into OpenAI for next-generation data centers, while OpenAI itself is tied up in $1 trillion computing deals. 

“When the same companies are both investing in and relying on each other, market growth can become an illusion,” warned Ahmed Banafa, a professor at San Jose State University. 

Despite market jitters, analysts anticipate solid top-line growth this quarter. Microsoft Azure revenue is forecasted to increase 38.4%, ahead of Google Cloud’s 30.1% and Amazon’s 18%. However, profits may dip across most companies except Microsoft, whose AI investments are already paying off.