Tech continues to bet on AI’s future with big investments

ChatGPT’s arrival in November 2022 created a surge in public fascination with artificial intelligence and its tremendous potential to disrupt industries and open doors for creativity in fascinating new ways. It didn’t take long for investors and Big Tech to notice, with large AI capital expenditures and significant investments quickly following. Companies like Nvidia became household names, as the computing pioneer reached the top spot for largest U.S. publicly traded company by market capitalization.

But after three years of an unprecedented surge in AI funding, the industry is still figuring out how to monetize the technology while continuing to make sizable investments. While Big Tech firms have pledged to continue massive capital expenditures on AI infrastructure, DeepSeek’s ability to produce high-quality AI while minimizing capital investment has highlighted how dynamic the market is and how rapidly change is arriving.

The 19th-century economist William Stanley Jevons asserted that as technology becomes more cost-efficient, consumption increases: the Jevons paradox. If true, then the cost-efficient advancements made by DeepSeek could reduce the cost of adoption and lead more middle market companies to adopt AI tools faster. That could create even higher demand for AI and its supporting infrastructure, such as data centers, as well as for chips. The paradox is supported by many software companies transitioning from a software as a service, or SaaS, license fee model to a consumption-based fee model.

AI investment continues to soar

Backing this assertion, Big Tech has shown an unwavering commitment to continue AI spending. According to Bloomberg, Amazon, Alphabet, Microsoft and Meta are collectively expected to dedicate $300 billion to $400 billion annually in capital expenditures in each of the next eight years, nearly all on AI-focused investments. The logic is that Big Tech can now do more with more. This spending has already shown signs of success in the latest financial results of each company. Microsoft’s Azure cloud unit, which posted a 33% gain in revenue in its third fiscal quarter of 2024−25, attributed 16% of that growth to AI—an increase from 13% in the previous quarter. 

“I’m very excited about the advances companies are making with AI and its potential to transform productivity and insight,” says RSM US Data Science and AI Director Robbie Beyer. “Vendors are investing heavily in AI tools and platforms they are rolling out, and users are gaining confidence in self-service AI models where they can chat with the data and get deeper insights from information.

“When we think about where the technology is going, agents and assistants will be much more context-aware and proactive to help people enhance workflows in the future,” he adds. “As investments and progress continue, people will be more empowered and have a lot more information at their fingertips.”

While Big Tech is one part of the AI investment story, private equity and venture capital interest further indicate that the AI spending boom will continue. In 2025, global capital invested in generative AI from private equity and VC more than doubled from 2024 levels—albeit with a significant amount coming from a few concentrated deals. Regardless, in the first quarter of 2025, AI and machine learning startups still attracted 57.9% of global VC funding, according to PitchBook, underscoring AI’s dominance in the VC market and the excitement of investors to get in early on the developing technology.

Amid uncertain economic conditions, AI demonstrates its resilience

Increased AI investment has endured in an uneven economic environment. While Big Tech may be able to weather the storm with well-capitalized balance sheets, what about other key players? As described above, private equity and VC firms still see the long-term value of investing in AI and are expected to continue investing capital.

Middle market companies have been reevaluating technology spend since interest rates began rising in 2022. Many have exercised caution when spending on growth-oriented technology, such as AI, and those decisions are ever-evolving—particularly during a time of macroeconomic uncertainty. However, the data suggests that AI adoption spending by non-Big Tech businesses is expected to continue into the foreseeable future, even as companies remain cost-conscious.

A recent Gartner report forecasts that business spending on generative AI will have increased from approximately $365 billion in 2024 to $644 billion by the end of 2025, or 76.4%. And while a few large companies will likely corner the market for large language models (LLMs) and functional AI, there will be value and opportunity in the many use cases that leverage those LLMs. Middle market companies, especially, should seek opportunities to differentiate themselves and provide value rather than competing with larger players that have significant capital with low to no borrowing cost.

The near-term prospects and future promise of agentic AI also allow middle market companies to reap the benefit of continued investment in AI. A recent survey conducted by PagerDuty of 1,000 information technology and business executives in the U.S., the UK, Australia and Japan indicated that 86% of organizations have or plan to deploy agentic AI in the next two years and on average expect a 171% return on investment. So while macroeconomic uncertainty may affect other capital deployment decisions, the ROI expectations of AI advancements may inspire even cost-conscious companies to make AI investments. 

Naysayers draw parallels to the dot-com bubble

While the outlook for AI has a lot of upside, the hype has naysayers drawing parallels to the dot-com bubble of the early 2000s. Some observers fear that expectation investing—investing on the expectation of the fully realized technology as opposed to where the technology currently is—and overexcitement could create an overvalued market and ultimately a crash.

The biggest lessons investors and companies can take away from the dot-com bubble are the need to:

• Perform proper diligence.
• Consider the fundamentals of potential investments.
• Stay up to speed on where AI is going.
  

AI technology is evolving quickly, and the cost of not keeping pace with change and not making continued AI investments could be dire. For example, DeepSeek’s breakthroughs are already reshaping the way companies are thinking about AI and the resources required to commercialize the technology. More of these types of disruptions are likely, even while AI spending continues.

The takeaway

While some may question whether we are in the middle of an AI bubble, the evidence suggests that AI capital expenditures will increase as AI use cases continue to grow. Rather than being a temporary spike, the current surge in AI investment appears to mark the early stage of a longer-term structural transformation that will see AI spending continue to grow for the foreseeable future.

This growth will not be limited to Big Tech, with capital flow into AI companies from private equity and VC remaining resilient amid broader dealmaking and macroeconomic uncertainties. Most importantly, middle market companies are not expected to pull back from continued AI investments as borrowing costs come down and agentic AI provides new use cases with sky-high ROI. For those moving forward, the opportunities from AI are only accelerating.