Noteworthy S&P 500 Movers on Thursday Decliners Facebook, Instagram, and WhatsApp parent Meta Platforms (META) reported third-quarter earnings per share that fell significantly shy of analysts’ forecasts, reflecting the impact of a $16 billion one-time tax charge related to the One Big Beautiful Bill. The social media giant also lifted the low end of its 2025 capital expenditure forecast and said expenses would grow “significantly faster” next year, raising concerns about its steep spending on artificial intelligence. Meta shares tumbled 11.3%.

(META) reported third-quarter earnings per share that fell significantly shy of analysts’ forecasts, reflecting the impact of a $16 billion one-time tax charge related to the One Big Beautiful Bill. The social media giant also lifted the low end of its 2025 capital expenditure forecast and said expenses would grow “significantly faster” next year, raising concerns about its steep spending on artificial intelligence. Meta shares tumbled 11.3%. Chipotle Mexican Grill (CMG) stock fell 18.2%, the most of any S&P 500 component, after the fast-casual burrito chain reported lower-than-expected third-quarter revenue and reduced its full-year forecast for comparable-restaurant sales. The company pointed to declines among 25- to 34-year-old customers who make less than $100,000, a key cohort that Chipotle says is turning to at-home food options amid a challenging macroeconomic environment.

(CMG) stock fell 18.2%, the most of any S&P 500 component, after the fast-casual burrito chain reported lower-than-expected third-quarter revenue and reduced its full-year forecast for comparable-restaurant sales. The company pointed to declines among 25- to 34-year-old customers who make less than $100,000, a key cohort that Chipotle says is turning to at-home food options amid a challenging macroeconomic environment. Shares of EMCOR Group (EME) dropped 16.6% after the mechanical and electrical construction specialist posted its third-quarter results. Although sales and profits came in ahead of expectations, operating margins were down from a year ago, and EMCOR’s narrowed full-year guidance failed to impress investors.

(EME) dropped 16.6% after the mechanical and electrical construction specialist posted its third-quarter results. Although sales and profits came in ahead of expectations, operating margins were down from a year ago, and EMCOR’s narrowed full-year guidance failed to impress investors. Although eBay (EBAY) surpassed third-quarter revenue and adjusted profit estimates, its guidance for the critical holiday quarter came in below expectations, and its shares slid 15.9%. The e-commerce company noted decelerating growth in the volume of goods imported into the U.S. from key markets following the removal of the de minimis exemption. Advancers Shares of logistics company C.H. Robinson Worldwide (CHRW) motored 19.7% higher, logging the S&P 500’s top performance Thursday. The freight forwarder has integrated AI to automate various processes, from providing quotes for shipping services to tracking shipments. AI-driven efficiency contributed to a significant year-over-year decline in operating expenses, while C.H. Robinson’s employee headcount is down more than 10% from a year ago.

(CHRW) motored 19.7% higher, logging the S&P 500’s top performance Thursday. The freight forwarder has integrated AI to automate various processes, from providing quotes for shipping services to tracking shipments. AI-driven efficiency contributed to a significant year-over-year decline in operating expenses, while C.H. Robinson’s employee headcount is down more than 10% from a year ago. Medical and pharmaceutical distributor Cardinal Health (CAH) beat sales and adjusted profit estimates for its fiscal first quarter of 2026 and raised its full-year forecasts. The company benefited from strong demand for high-margin specialty medicines and branded drugs. Its shares soared 15.4%.

(CAH) beat sales and adjusted profit estimates for its fiscal first quarter of 2026 and raised its full-year forecasts. The company benefited from strong demand for high-margin specialty medicines and branded drugs. Its shares soared 15.4%. Moderna (MRNA) shares surged 13.9% following reports that the vaccine maker has held talks with a large pharmaceutical company about a potential major partnership or buyout agreement. The biotech firm has faced pressure as sales taper off for its COVID-19 vaccines. No details have emerged about the nature or scope of a possible deal.

-Michael Bromberg

Apple Stock Jumps as CEO Predicts Best Holiday Season Ever Apple is on a record-setting streak. Shares of Apple (AAPL) were up more than 3% in extended trading Thursday, topping their recent highs after the iPhone maker posted earnings that exceeded analysts’ estimates and CEO Tim Cook gave an upbeat outlook for the holiday season. Apple reported fiscal fourth-quarter earnings per share of $1.85 on revenue that rose 8% year-over-year to $102.47 billion. Both figures came in ahead of analysts’ estimates compiled by Visible Alpha, as Apple’s services revenue climbed to a record high of $28.75 billion. Growth in Apple’s iPhone sales also helped drive the better-than-expected results, after the company launched its iPhone 17 lineup in September. Sales of iPhones rose 6% to $49.03 billion in the fourth quarter, contributing the bulk of Apple’s product revenue. The figure also represented a September quarter revenue record for the iPhone, with CEO Tim Cook suggesting that could mean a record holiday season ahead. Apple CEO Tim cook shakes hands with President Donald Trump at a meeting this week in Tokyo. Andrew Harnik / Getty Images “We expect December-quarter revenue to be the best ever for the company and the best ever for iPhone,” CEO Tim Cook said on the company’s earnings call Thursday, anticipating 10% to 12% revenue growth.2 Apple shares were up about 8% for 2025 through Thursday’s close. This week’s gains have boosted Apple’s market capitalization above $4 trillion, making it the word’s second-most-valuable company behind only AI chipmaker Nvidia (NVDA). -Kara Greenberg

Amazon Stock Pops as Earnings Top Estimates Amazon (AMZN) shares jumped in extended trading Thursday after the e-commerce and cloud giant posted third-quarter results that blew past analysts’ estimates, driven by growth in its cloud business. The shares were up over 13% at around $252 after hours, at what would be their first all-time high since early February. The online retail and cloud computing provider reported earnings per share of $1.95, up from $1.43 the same time a year ago, and well above the analyst consensus compiled by Visible Alpha. Revenue rose 13% year-over-year to $180.2 billion, also beating expectations as sales in the company’s Amazon Web Services segment jumped 20% to $33 billion. “We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business,” said Amazon CEO Andy Jassy, adding that the company has particularly benefited from “strong demand in AI and core infrastructure, and we’ve been focused on accelerating capacity.” Looking ahead, Amazon said it expects fourth-quarter revenue to come in between $206 billion and $213 billion, compared to the analyst estimate of $208.66 billion. Earlier this week, Amazon announced what could be its largest layoffs in company history, with plans to reduce its headcount by about 14,000 jobs, through layoffs and changes to their hiring plans as it and other tech companies look to trim costs elsewhere as they spend hundreds of billions on expanding their artificial intelligence infrastructure. Through Thursday’s close, the shares were up less than 2% for 2025, as concerns about tariffs and lagging cloud growth weighed on sentiment around the stock. -Aaron McDade

Why Americans Are Still Spending Big—Even as Inflation and Job Worries Grow

Rising inflation, a weak job market, the government shutdown and trade tensions have consumers on edge. Despite that pessimism, economists said consumers are prepared to keep spending ahead of the upcoming holiday season. “These challenges may cause consumers to slow their roll but will ultimately not stop them from getting out and spending this season,” wrote Wells Fargo economists Tim Quinlan, Shannon Grein, and Andrew Thompson. “The very uneasiness that is spooking consumers may itself be a factor that drives consumption for households in search of comfort and a sense of normalcy.” Eilon Paz/Bloomberg via Getty Images October’s consumer confidence survey, released earlier this week, showed a decline in sentiment, continuing a trend of poor results tied to Trump’s tariff announcements. The monthly Conference Board report showed that a weak labor market has consumers worried about future business conditions, wages, and job availability. It also indicated that holiday spending would fall this year. But economists doubt shoppers will stay on the sidelines this season, with Wells Fargo projecting holiday retail sales to rise between 3.5% and 4% from last year. “We have long cautioned against reading too much into confidence and sentiment as they do not always serve as reliable gauges for future consumer spending,” Wells Fargo wrote. “Retail therapy may be just the cure for households feeling low this holiday season.” Read the full article here. -Terry Lane

Starbucks Is Carrying Out a Major Revamp. There Are Signs It’s Working.

Starbucks is back in consumers’ daily grind. The company’s year-long turnaround campaign is gaining ground, executives said on a conference call Wednesday. Same-store sales started to grow on a year-over-year basis in the fiscal fourth quarter after a year-and-a-half of declines. Business improved among Starbucks Rewards members and less-frequent visitors, showing the Back to Starbucks campaign is on track, CEO Brian Niccol said. Starbucks says it’s doing more business with loyal customers and newcomers. David Paul Morris / Bloomberg / Getty Images Comparable sales at Starbucks-operated stores in the U.S. “turned positive in September, driven by transactions, and it [has] remained positive through October, reflecting the momentum taking shape in our business,” Niccol said, according to a transcript made available by AlphaSense. Same-store sales in North America were flat in the quarter ended Sep. 28 compared to the year-earlier period, snapping a six-quarter streak of negative numbers, according to data from Visible Alpha. Globally, same-store sales reversed an equally long period of decline, growing 1% year-over-year. Read the full article here. -Sarina Trangle

CH Robinson Worldwide Is Top-Performing Stock in S&P 500 Thursday

C.H. Robinson Worldwide (CHRW) was the top-performing stock in the S&P 500 Thursday, a day after the transportation and logistics company reported better-than-expected third-quarter profit and lifted its fiscal 2026 operating income target. Shares of the Eden Prairie, Minn.-based firm soared about 20% to an all-time high after it posted adjusted earnings of $1.40 per share. Analysts surveyed by Visible Alpha had expected $1.30. Revenue of $4.14 billion was down nearly 11% year-over-year and below estimates of $4.23 billion, which CEO Dave Bozeman attributed to “unfavorable conditions for global transportation companies in the third quarter.” However, Bozeman said that “there is no doubt in our minds that we are on the right path to deliver sustainable outperformance. Our model, with an industry-leading cost to serve, is highly scalable and we expect it will improve further as we harness the evolving power of AI to drive automation across the quote-to-cash lifecycle of a load.”

Based on what CFO Damon Lee said was “confidence in our strategy, our disciplined execution, and our significant runway for further improvement,” C.H. Robinson raised its fiscal 2026 operating income forecast by roughly $50 million to a range of $965 million to $1.04 billion. “The bottom end of this range, which assumes zero market volume growth, equates to approximately $6 of earnings per share,” Lee added. Visible Alpha consensus had called for fiscal 2026 earnings of $5.62 per share. Including today’s sharp gains, C.H. Robinson shares have added half their value this year.

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Apple Is Set to Report Earnings Today. Here’s What You Need to Know

Apple (AAPL) is set to report its fiscal fourth-quarter earnings after the closing bell today, with Wall Street analysts looking for strong results on the top and bottom lines. After some signs of a strong start to early sales of the iPhone 17 lineup, bullish analysts at JPMorgan and Morgan Stanley recently told clients their expectations around Apple’s results have climbed, with that momentum likely to carry into an upbeat outlook for the current quarter and winter holiday season. Michael Nagle / Bloomberg / Getty Images More details around widely anticipated artificial intelligence features and potential plans for a foldable phone in 2026 could also drive more enthusiasm for Apple’s stock, they said. Options pricing suggests traders expect Apple stock could move about 3% in either direction by the end of this week following the company’s earnings call, which could drive the stock to a new record. Apple shares have climbed about 8% in 2025 so far, lagging the S&P 500’s nearly 17% gain, after spending some of the year in negative territory amid worries about its AI progress. Apple’s gains have largely come in the last few months, after some signs of inroads with the Trump administration and easing trade policy headwinds, along with promising demand signals for the iPhone 17. Read the full article here. -Kara Greenberg

Amazon Is Set to Report Earnings Today. Here’s What Investors Should Know

Amazon is scheduled to report third-quarter earnings after markets close on Thursday, and all eyes are likely to be on the e-commerce giant’s cloud business. Amazon is expected to report third-quarter revenue of about $178 billion, a 12% increase from last year, according to analyst estimates compiled by Visible Alpha. Adjusted earnings are expected to hold steady at $1.95 a share. While Amazon’s e-commerce operation makes up the bulk of its business, investors will be most focused on its AI efforts, represented by cloud revenue and capital expenditures. Amazon’s cloud growth of 17.5% in the second quarter exceeded official expectations, but disappointed Wall Street after two blowout reports from competitors Microsoft (MSFT) and Alphabet (GOOG). On Wednesday, both of those companies again posted cloud revenue well ahead of Wall Street’s estimates, setting another high bar for Amazon to clear. Amazon’s second-quarter cloud growth fell short of high expectations. JONAS ROOSENS / BELGA MAG / AFP via Getty Images Investors may also be primed for Amazon to increase its capital expenditures guidance after Alphabet and Meta Platforms (META) did so with their reports Wednesday. Amazon’s second-quarter capex of $32.2 billion was about 25% higher than analysts expected. Wedbush analysts expect Amazon’s full-year capex to total $119 billion, implying growth of about 10% between the first and second halves of this year. Read the full article here.

-Colin Laidley

Core Scientific Shareholders Reject Proposed $9B Acquisition by CoreWeave Core Scientific shareholders evidently did not think CoreWeave’s proposed acquisition of the firm valued it highly enough. Core Scientific (CORZ) announced Thursday that its shareholders “did not receive the votes necessary to approve the previously announced merger agreement with CoreWeave” at a special meeting. Core Scientific shareholders rejected CoreWeave’s proposed $9 billion acquisition. Mustafa Hatipoglu / Anadolu via Getty Images In July, CoreWeave (CRWV) reached an agreement to acquire its longtime data center partner in an all-stock deal worth roughly $9 billion. However, last week proxy advisor Institutional Shareholder Services, or ISS, panned the deal ahead of today’s shareholder vote, saying “the market believes the company’s value is greater than the offer.” Core Scientific shares rose 4% after the vote, and are up more than 50% this year. Shares of CoreWeave—which rents out access to Nvidia (NVDA) graphics processing units—fell 5% but have more than tripled since the firm’s IPO back in March.

Fox Stock Surges After Stronger-Than-Expected Results, Powered by Tubi, Sports Fox reported. Investors decided. Shares of Fox Corp. (FOX) jumped 6.5% Thursday after the media giant reported better-than-expected fiscal 2026 first-quarter results. Fox posted adjusted earnings of $1.51 per share on revenue that increased 5% year-over-year to $3.74 billion. Analysts polled by Visible Alpha had expected $1.08 and $3.57 billion, respectively. The company said that its “Tubi AVOD service, stronger news pricing and higher sports pricing and ratings led by the NFL” led to advertising gains of 6%, despite lower political advertising revenue. “We are delivering for audiences with continued engagement growth across the portfolio which underpins the robust advertising demand we are seeing across sports, news, entertainment and Tubi,” Fox CEO Lachlan Murdoch said. Including today’s sharp gains, Fox shares have added more than a quarter of their value this year.

Boeing Stock Again Leads Dow Decliners For a second straight day, Boeing is the worst-performing stock in the Dow Jones Industrial Average. Boeing (BA) shares fell 3.3% to lead blue-chip decliners early Thursday, a day after the plane maker posted weaker-than-expected profit and a $4.9 billion charge “associated with updated 777X certification timing.” Despite the two-day fall, shares of Boeing are up about 17% this year, above the roughly 12% gain in the Dow.

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Eli Lilly Stock Surges as Drugmaker Lifts Outlook Following Robust Mounjaro, Zepbound Sales Strong sales of Eli Lilly’s blockbuster weight-loss treatments Mounjaro and Zepbound are powering its shares Thursday morning. Eli Lilly (LLY) stock surged 4% in premarket trading after the maker of diabetes treatment Mounjaro and obesity drug Zepbound lifted its full-year outlook following stronger-than-expected third-quarter results. The Indianapolis-based firm reported adjusted earnings of $7.02 per share on revenue that soared 54% year-over-year to $17.60 billion. Analysts surveyed by Visible Alpha had expected $5.91 and $16.06 billion, respectively. Mounjaro sales more than doubled to $6.52 billion, topping projections of $5.41 billion. Sales of Zepbound skyrocketed nearly tripled to $3.59 billion, while analysts had estimated $3.37 billion. As a result, Lilly raised its full-year revenue guidance to a range of $63.0 billion to $63.5 billion from the prior $60 billion to $62 billion, and its adjusted EPS outlook to $23.00 to $23.70 from $21.75 to $23.00. Eli Lilly shares entered Thursday up just 5% year-to-date, trailing the benchmark S&P 500’s 17% advance.

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Chipotle Stock Sinks on Comparable-Restaurant Sales Outlook Cut as Young Customers Visit Less Often Young customers are making fewer visits to Chipotle. Shares of Chipotle Mexican Grill (CMG) sank 17% in premarket trading Thursday, a day after the fast-casual chain cut its comparable-restaurant sales outlook as it said inflation is taking a toll. The Newport Beach, Calif.-based company reported third-quarter revenue of $3.00 billion, up 7.5% year-over-year but below the $3.06 billion consensus estimate of analysts polled by Visible Alpha. Adjusted earnings of $0.29 per share matched expectations. Chipotle now sees full-year comparable-restaurant sales down “in the low-single-digit range” versus its July forecast of “about flat” comparable sales. “We continue to see persistent macroeconomic pressures,” CEO Scott Boatwright said in the earnings release. On a later call with analysts Wednesday, Boatwright said that Chipotle is seeing a “significant pullback” from customers 25 to 34 years old who make less than $100,000 a year. “We’re losing them to grocery and food at home,” he said. “And so, that consumer is under pressure. It is one of our core consumer cohorts. And so, they feel the pinch and we feel the pullback from them as well.”

Chipotle shares entered Thursday having lost about a third of their value this year. TradingView

How the Federal Reserve Could Inflate or Pop an AI Bubble

Concerns about an AI bubble have some on Wall Street warily eyeing Silicon Valley, but others say they’re looking in the wrong direction. Washington, D.C.—specifically the Eccles Building, where the Federal Open Market Committee sets monetary policy—is where the fate of an AI bubble may be decided, they say. “I think you’re going to have a very hard time popping a bubble when the Fed is cutting rates,” said Jeff deGraaf, Chair and Head of Technical Research at Renaissance Macro Research, on a recent episode of the firm’s weekly Youtube series. The Dotcom bubble, the U.S. housing bubble, and the Japanese bubble of the late 1980s all popped either while or shortly after central banks hiked rates, according to deGraaf. Fed Chair Jerome Powell speaks on Wednesday after the central bank lowered interest rates by a quarter of a percentage point. Al Drago / Bloomberg via Getty Images Artificial intelligence has propelled stocks to record highs this year, but recent developments have raised some red flags. A series of circular deals by the likes of AI bellwethers Nvidia (NVDA) and OpenAI have drawn comparisons to the vendor financing agreements that fueled bubbles in the 1990s. The Magnificent Seven account for 35% of the S&P 500, evidence of an increasingly concentrated stock market. And the benchmark index’s price-to-earnings ratio isn’t far off the Dotcom Bubble’s peak. “I think it’s early,” DeGraaf said of a potential AI bubble, evidence of which he argued doesn’t appear to be “rampant” yet. Though, he warned, “you could have [a] world play out where the economy softens, the Fed is forced to get more aggressive, and the market absolutely goes into the stratosphere because they’re looking at the liquidity. And I think that’s a big disconnect that people don’t appreciate.” Read the full article here. -Colin Laidley

Wall Street has been mulling over fears of a bubble in the artificial intelligence (AI) space for quite some time. Analysts are divided in their views on whether AI investments can pay off within the required timeframe. Let’s find out what market experts are feeling about it.

Fears of a bubble in high-flying U.S. tech stocks may be premature — at least according to Goldman Sachs strategist Peter Oppenheimer, who believes that strong earnings, not speculation, are aiding the current rally, per Bloomberg, as quoted on Yahoo Finance.

He acknowledges that valuations are “stretched but not yet at levels consistent with historical bubbles.” The Nasdaq 100 now trades at 28x forward earnings, well above its 10-year average of 23, the above-mentioned source mentioned.

Oppenheimer believes that ripe valuations in both equity and credit markets reflect broader macro conditions — low rates, high global savings and a protracted economic cycle.

AI Spending Frenzy

While Wall Street remains largely bullish, growing caution is emerging around the massive capital pouring into AI infrastructure.

OpenAI, valued at $500 billion, lacks a profitable business history despite spending billions on data centers. It recently inked deals with NVIDIA, AMD and Oracle. Other tech players, including NVIDIA, Oracle, Amazon, Google, Meta, and Microsoft are all making similar billion-dollar AI bets.

Bubble or Building Phase?

Tech leaders are split. Jeff Bezos said we may indeed be witnessing an AI bubble, noting that “every company gets funded — good or bad” but he added that some of the quality investments will eventually reap rewards, as quoted on Yahoo Finance.

Goldman Sachs CEO David Solomon echoed the view, warning that rapid capital formation often gets ahead of real potential, the same Yahoo Finance article indicated.

Still, some experts, like Santa Clara University’s Ram Bala, argue the investments will pay off over the long term, as quoted on Yahoo Finance. AMD CEO Lisa Su said the AI boom is still in its nascent stage. Su sees it as the beginning of a 10-year kind of super-cycle, as quoted on the same Yahoo article.

Big Capex = Big Conviction?

While some are hesitant about the massive AI investments, some bulls expect Big Tech’s aggressive forward plans to stand out. In an environment where AI bubble fears are rampant, these companies are forging ahead. This shows their conviction in their investment plans.

Then again, investors need to be very choosy while picking tech stocks. Note that even AMD and OpenAI’s chip deal isn’t appearing to be a lucrative bet to Bernstein’s Stacy Rasgon. The analyst noted that the chipmaker’s processors don’t yet exist, and it has never handled an AI project of this size, as quoted on Yahoo Finance.

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When Sriram Krishnan, a senior White House policy advisor on artificial intelligence, appeared onstage at an event in Washington last month, he listed the Trump administration’s priorities for advancing the AI revolution.

At the top of the list? More construction.

“Let’s make sure we build our infrastructure,” Krishnan said. “‘Build, baby, build’ is what we tell people.”

That rallying cry is echoing across Silicon Valley. Executives at Meta say they expect to spend $600 billion on AI infrastructure, including massive data centers, through 2028. OpenAI and Oracle have announced plans to put $500 billion into a data center project dubbed Stargate, while Amazon plans to spend more than $30 billion on capital expenditures, or capex, in each of the next two quarters.

The problem: The business case for AI remains untested, and it’s unclear whether the revenue from AI products will justify the ever-growing spending. If it does, it could push the economy onto a higher growth curve and transform entire industries. If it doesn’t, the fallout could reshape the economy — from stock market crashes to communities left with vast, vacant data centers.

Earlier this year, Business Insider published an investigation into the data center industry, creating the most comprehensive map to date of where data centers are in the US. The investigation found 1,240 data centers in America already built or approved for construction at the end of 2024, an almost fourfold increase since 2010. The data didn’t include any projects that received permits this year.

This year, four of the five biggest energy users from our tally, Amazon, Meta, Microsoft, and Google, could spend an estimated $320 billion on capex, primarily for AI infrastructure, according to an analysis of financial statements by Business Insider. That’s more than the GDP of Finland and just shy of the total revenue ExxonMobil earned in 2024.

The scale of the investment is sparking concerns about a bubble and the potential for a pop that could bring the stock market crashing down from record heights.

So far, the concerns haven’t spooked investors. The tech-heavy Nasdaq is up 19% this year, with Nvidia, the world’s largest company by market capitalization, Google, and Microsoft all up more than 25%. Oracle has seen its stock rise 75% this year.

The money spent this year on AI infrastructure and software has contributed more to GDP growth than consumer spending, according to Renaissance Macro Research’s reading of Bureau of Economic Analysis data.

It’s a construction boom unlike any in living memory, transforming landscapes, drawing on scarce water resources, and taxing America’s already strained electricity grid. The sheer ambition has drawn comparisons to the Apollo space program, the interstate highway system of the mid-1900s, and the fiber-optic bust around the turn of this century that left miles of “dark fiber.”

Sarah Friar, OpenAI’s finance chief, recently underscored the size of the industry’s goals, when she spoke on the sidelines of a Goldman Sachs conference in September. AI spending, she said, wasn’t like the 19th-century railroad system — it was like the early days of it.

“A lot of people have compared the AI era to things like the railway build-out, because it is a very capital-intensive build-out,” Friar told Yahoo Finance. “I think we are just beginning. We’ve maybe laid some track from New York to Baltimore, but we’re ultimately going to blanket the US, and ultimately blanket the world.”

If the bet pays off, the returns could make the money sunk into data centers seem small. The data-center boom would become the foundation of the next tech cycle, letting Amazon, Microsoft, Google, and others rent out intelligence the way they rent cloud storage now. AI agents and custom models could form the basis of steady, high-margin subscription products.

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If it doesn’t pay off? Look no further than the railroads. Overinvestment in rail lines, including the Transcontinental Railroad, sparked not one but two banking crises in the latter half of the 1800s. The industry struggled with overspending, eventually leaving investors and the banks that had backed them with heavy losses.

Despite the investment, the business case for AI is still untested.

The AI infrastructure boom is built on a fundamental assumption about how machines learn best. The approach involves feeding massive amounts of data into large language models, which then look for patterns, or signals, buried in the noise. To improve, the theory goes, the models must ingest and analyze increasing amounts of data, which requires more and more computing power.

That need for scale has shaped the competitive landscape. If better models depend on more computing power, the obvious next step is to secure as much of it as possible. And that means more data centers — large warehouses filled with graphics processing units, or GPUs, that handle the complex computations required.

In a recent blog post, OpenAI CEO Sam Altman imagined what might be possible if AI systems had virtually unlimited computing power. AI could cure cancer or give every student on Earth a personalized tutor. “If we are limited by compute,” he wrote, “we’ll have to choose which one to prioritize; no one wants to make that choice, so let’s go build.”

Gary Marcus, a New York University professor emeritus of psychology and neural science and a vocal critic of Silicon Valley’s approach to developing AI, has argued against the strategy that building bigger is better. Marcus has repeatedly argued that the fundamental theory driving Big Tech companies to build computing capacity, the scaling laws, is wrong.

“The meaning of the word scaling has been greatly devalued,” Marcus wrote. “‘Scaling’ used to mean ‘I can predict pretty much exactly how well a given LLM will do, by knowing the size of its database and the amount of compute being used to train it, and those increases will be exponential.” Not anymore, he wrote.

OpenAI’s August launch of GPT-5, its latest model, underscored Marcus’ skepticism, as many perceived it as an incremental step and a challenge to the idea that adding more computing power makes better models. The leading language models still make simple mistakes, or hallucinations, that hurt their reliability. The problem persists even as companies have poured exponentially more computing power into training them, according to Bain & Company.

Big-spending corporations have yet to show meaningful results aided by AI, several studies have concluded. Researchers at the Massachusetts Institute of Technology published a report this summer suggesting 95% of early corporate AI initiatives had yet to deliver a return. Tech stocks briefly slumped on the report, among other reasons.

Researchers at BetterUp Labs and the Stanford Social Media Lab coined the term “workslop” to describe the substandard AI-assisted product that more and more employees are producing. Because the models still lack accuracy and nuance, the task of fact-checking and cleaning the output falls to colleagues. Writing in the Harvard Business Review, the researchers said 40% of the 1,150 workers they surveyed reported having received “workslop” from colleagues over the past month.

With its utility still in question, it’s not clear when or if the revenue to come from AI products will justify its spending. Bain estimates that by 2030, annual capex spending will be $500 billion to meet the industry’s computing needs. To justify that, companies would need to generate $2 trillion in annual revenue, Bain said. That’s about $800 billion more than companies can save by using AI to make sales, marketing, customer support, and R&D more efficient. In other words, the consulting firm concluded, the industry will come up short unless it can find new products or services to sell.

In September, Friar, OpenAI’s CFO, said the company will triple revenue this year to about $13 billion. That same month, the company agreed to pay Oracle an average of $60 billion a year for data center capacity — nearly five times more than it expects to bring in.

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McKinsey & Company acknowledged, in an April report about capex spending, the difficult position the industry is in: Spend too little and risk missing out on a technology that may be one of the most transformative in history. Spend too much and risk wasting tens or hundreds of billions of dollars.

“The stakes are high,” McKinsey wrote in the report. “Overinvesting in data center infrastructure risks stranding assets, while underinvesting means falling behind.”

Meta CEO Mark Zuckerberg put it more bluntly when he admitted how much money he was prepared to waste to win the AI arms race. “If we end up misspending a couple of hundred billion dollars, I think that that is going to be very unfortunate,” Zuckerberg told a podcast interviewer. At the same time, he underscored the risk of losing out if productive AI usage gains traction.

“I actually think the risk is higher on the other side,” he said.

A quarter of a century ago, a similar pattern emerged when firms rushed to lay the backbone of the emerging internet. Companies like WorldCom and Global Crossing spent tens of billions of dollars in the five years through 2001 laying fiber optic cables and installing other networking capabilities, only to crash the following year when the dot-com bust led lenders who had financed the construction to demand their money.

Shareholders in the companies leading the fiber-optic build-out lost $2 trillion in value, while 500,000 workers lost their jobs, according to analysis conducted by the Brookings Institution. While the fiber optic cable was eventually put to use, largely by the streaming video revolution pioneered by Netflix, many of the companies that laid it weren’t around to see it.

Like fiber optic cables and the railroads of an earlier era, data center construction and the purchase of GPUs are being financed by Wall Street.

Some of the money is coming through familiar channels. Oracle recently sold $18 billion worth of bonds to finance its data center expansion plans, while data center upstart CoreWeave, which went public in March, has tapped the public debt and equity markets to the tune of $25 billion since last year to fund its own expansion.

Increasingly, companies are also turning to less traditional lenders. Meta recently raised $29 billion for its latest data center project from firms including the Pacific Investment Management Company and Blue Owl Capital. The deal allowed Meta to raise billions without having to report the full amount on its balance sheet.

When Meta CFO Susan Li was asked about the company’s plans for non-traditional financing methods at a recent conference, she said the company had built its own data centers for most of its history. Now, she said, as “the ambition of our infrastructure capacity unfolds ahead of us, it kind of dwarfs what we’ve built before, and we need to be sort of more expansive in the way that we are thinking about this.”

Other data center developers are using the securitized bond markets to keep the boom going. Once a project is built and leased, they’re turning the leasing revenue into bonds and selling to investors eager to be part of the AI boom. That frees up more money to put into future projects and fuels the spending, even if demand for mature data center projects starts to wane, said Paul Kedrosky, a financial blogger and advisor to hedge funds who recently wrote about the development.

“Developers build data centers, lease access to hyperscalers, and then package the rental income into bonds. Proceeds are recycled into the next round of construction,” Kedrosky wrote on his website. “In short: the structured-credit world, not the real estate equity one, now finances the data-center boom.”

Increasingly, Silicon Valley itself is helping to finance the boom. In September, Nvidia agreed to invest $100 billion into OpenAI to help with its data center build-out, with the expectation that OpenAI would turn around and use the money to purchase Nvidia’s GPUs for its data centers. Microsoft invested in OpenAI early, and OpenAI used the money to rent out Microsoft’s computing capacity. On Monday, chipmaker AMD announced that OpenAI has agreed to buy GPUs to power as many as 6 gigawatts of computing capacity in return for a warrant that would give OpenAI a 10% stake in the chipmaker if it hits certain milestones.

“This partnership is a major step in building the compute capacity needed to realize AI’s full potential,” Altman said in the statement announcing the deal.

The circular flow of money is yet another element of the AI infrastructure bet that underscores its scale, as well as its risks. If the hype around AI proves fleeting — if more computing power doesn’t equate to better models, or the industry can’t find more ways to make more money — the interlocking investments could magnify the fallout.

Even proponents of AI say the math is daunting.

“We are bullish on this in a big way,” said David Crawford, the chairman of Bain’s technology practice. “The point we were trying to make is that it’s expensive.”

Key Takeaways Stock market returns through the rest of the year are likely to be strongly influenced by the infrastructure spending, cloud computing deals, and positive sentiment lifting AI and tech stocks.

Some experts warn an increasingly “circular” AI ecosystem—in which companies invest in their own customers—could be vulnerable to a shift in the business environment.

Sentiment around AI, and the possibility that the nascent technology may disappoint investors, remains a key risk to AI stocks.

The U.S. stock market entered the final quarter of the year near record highs, boosted by soaring AI stocks that have become increasingly critical for the market’s performance.

Most of the best-performing stocks in the S&P 500 this year are directly tied to the AI boom. Data storage companies Seagate Technology (STX) and Western Digital (WDC) have seen their shares nearly triple in value this year, while Palantir (PLTR) and Applovin (APP), two software firms that have excelled at translating AI capabilities into revenue, have more than doubled. And despite a rough start to 2025, all of the Magnificent Seven stocks are up since the start of the year.

Why This Matters To You The artificial intelligence boom has been the primary source of fuel propelling the bull market of the past few years. As such, the performance of most investment portfolios is increasingly tethered to the performance of AI stocks.

The Magnificent Seven account for one-third of the S&P 500, and thus have an outsized influence over the broader market’s performance. And these stocks, experts say, are increasingly tied to AI.

The Mag 7’s “share prices are a daily referendum on whether AI is considered hype or reality,” wrote Christopher Gannatti, Global Head of Research at WisdomTree, in a recent blog post. They “are priced as if AI is not just a growth driver, but the growth driver,” Gannatti added.

As such, the investments, deals and optimism propelling the AI trade are likely to be pivotal for the entire stock market in the coming months.

CapEx Likely To Remain in the Spotlight

Massive infrastructure investment from the likes of Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN) and Meta (META) has been a primary source of fuel for the AI rally. Their spending has caused revenue at chipmakers like Nvidia (NVDA), Broadcom (AVGO) and Micron (MU) to explode, and underpinned the narrative that AI demand is insatiable.

The hyperscalers will all update investors on their capital expenditure plans when they report quarterly results in late October and early November. Alphabet and Meta each lifted their capex forecasts in their most recent earnings reports, while Microsoft and Amazon said they would continue to invest heavily in infrastructure throughout the year.

Tax changes codified by the One Big, Beautiful Bill, which empowers companies to immediately write off infrastructure investments, could give them reason to lift capex further. Experts note immediate write-offs should boost free cash flow, allowing companies to invest even more in AI. Hyperscalers have had a few months to figure out how the bill, which was signed into law by President Donald Trump on July 4, will affect their finances and, thus, investments.

Citi analysts on Tuesday estimated that hyperscalers, including Oracle (ORCL) and CoreWeave (CRWV), will spend $490 billion on infrastructure, up from their prior estimate of $420 billion. “We expect the major hyperscalers to reflect this incremental spend in guidance discussions during 3Q results,” the analysts wrote.

Unexpected increases to capex guidance could reinforce Wall Street’s bullishness on the semiconductor, software, and energy companies benefiting most from the AI buildout.

Big, Multi-Year Deals Are Gaining More Attention

“We’re seeing a bit of an evolution” in the drivers of the AI rally, Gannatti told Investopedia.

“It kind of started with the hyperscalers—Microsoft, Amazon, Alphabet—saying, ‘We have a certain amount of cash flow. We’re going to make investments.’” Today, Gannatti says, AI companies are investing in one another, and using those investments to buy goods and services from each other.

The most notable example of this was announced last month, when OpenAI committed to deploying 10 gigawatts of Nvidia systems to train and run its next-generation models. In return, Nvidia will invest $100 billion in OpenAI as capacity comes online, effectively subsidizing the start-up’s infrastructure expenses.

“So there’s a bit of circularity,” says Gannatti, who notes there’s a risk to these sorts of deals. “None of these things are guaranteed,” he said, including OpenAI’s commitment to spend $300 billion on Oracle’s cloud computing services over the next five years. “If the business environment changes, the music might need to stop—not necessarily forever, but for a while.”

Concerns About an AI Bubble Likely To Persist

Investors have worried about an AI bubble for quite some time, and the rally faces the risk that AI sentiment sours, weighing on investment and depressing stock valuations.

So far, tech companies have been able to show investors enough benefit from AI to keep Wall Street comfortable with their spending, said Gannatti. “But you feel like you’re always one earnings cycle away from a negative interpretation of a certain announcement,“ the kind of less-than-ideal development that throws cold water on a red-hot market, he added.

Several events this year have briefly appeared to be this watershed moment. In January, investors caught wind of Chinese start-up DeepSeek’s super-efficient reasoning model, briefly calling into question the wisdom of Silicon Valley’s AI spending. And AI stocks swooned over the summer when an MIT study found that 95% of corporate generative AI pilot projects failed to deliver any material return on investment. Yet, on every occasion, investors have shaken off the panic and continued to pile into AI stocks.

There are reasons to be optimistic that today’s AI boom is more resilient than the bubbles to which it is often compared. “The positive is it’s not being financed by debt, at least not yet,” said Gannatti. “So it’s not like the fiber optic buildouts in, say, 1999 and 2000, where the companies didn’t even have the fundamentals.”

Instead, the companies funding the AI buildout have some of the biggest businesses, healthiest balance sheets, and deepest pockets of any companies on earth. Their hugely profitable non-AI businesses could mitigate the fallout of a shift in sentiment toward AI.