Important points
-
It’s difficult to know how much money is being spent on AI-related computing resources.
-
To fund these investments, even companies with top financial standing enter into unique and complex transactions.
-
No one has any idea how the unprecedented AI investment boom will ultimately pay off.
In the long run, S&P500 The index produces an average annual return of 10%. But recently, a high-profile benchmark has shattered that. It delivered a total return of 26% in 2023, 25% in 2024, and 18% in 2025. Investors have no complaints.
The recent surge can be attributed to the ongoing artificial intelligence (AI) craze. This is evidenced by the fact that the Magnificent Seven stocks account for approximately one-third of the S&P 500’s total market capitalization, according to new research from The Motley Fool.
Will AI create the world’s first millionaire? Our team published a report on one little-known company called an “essential monopoly” that provides critical technology needed by both Nvidia and Intel. Continued “
Investors would be wise to consider the potential risks that the current environment may pose. Is the current stock market in an AI bubble? Here are three possible warning signs.
AI-powered bubble-blowing robot face drawing.
Image source: Getty Images.
1. Spending on AI infrastructure is unprecedented
Among the companies at the forefront of AI, those that build and operate large-scale data centers are called hyperscalers. This group includes: Amazon, microsoftand alphabeta leading cloud computing provider. Together, the companies spent hundreds of billions of dollars in AI-related capital spending last year, an increase in spending compared to the previous year.
What is at least somewhat reassuring is that these three hyperscalers are among the most financially healthy companies in the world. They have the cash flow and strong balance sheet to play this game.
This is not necessarily the case with OpenAI, which started this AI race when it introduced ChatGPT to the world in November 2022. OpenAI plans to spend a mind-boggling $600 billion on computing infrastructure by 2030, down from previous guidance of $1.4 trillion. In addition to the fact that this is a staggering number, consider that OpenAI reported 2025 revenue of just $13 billion. This is a huge funding gap that needs to be filled.
2. Complex financial arrangements are the norm and form a house on the sand.
One of the most notable trends occurring as AI infrastructure permeates the economy has to do with the financing aspect. Investors must be critical about where their money comes from. I have some concerns.
Circular arrangements are a common theme. Companies use this new capital to acquire stock positions in companies that buy products and services that investors sell. Nvidia (NASDAQ:NVDA) recently announced a $30 billion investment in OpenAI and will use the proceeds to purchase the latest Vera Rubin GPUs from Nvidia.
meta platform is performing a unique feat of financial engineering. Despite posting impressive profits and free cash flow, the social media giant is inking its own deals to keep its balance sheet clean. The company has formed a $27 billion joint venture. blue owl capital Build a Hyperion data center. Additionally, Meta announced a five-year, $60 billion deal to buy chips. advanced micro devicewith the option to buy 10% of the business later.
Clearly, the level of financial interconnection between different companies is increasing, creating the possibility of a house on the sand. Let’s assume that one of these businesses encounters an unexpected failure for some reason. This can cause ripple effects with negative consequences.
3. Payments are uncertain and sustainable business models are unclear
All of this spending is being done without a clear view of what the bottom line will be. OpenAI provides support for this argument. The company has 900 million weekly active users. That’s certainly impressive.
Menlo Ventures published research suggesting that only 3% of AI users actually pay for higher-tier options. As a result, the monetization of some of the most popular AI tools is being questioned. I think most people will have no problems using the free version. From this perspective, AI may simply be a brand new toy to be leveraged only in corporate environments.
There is another, more sober way to think about the future of AI. There is a non-zero chance that this technology will not be the revolutionary advance that the biggest bulls hope for and will provide a small benefit to the economy, but it is meaningful.
The smartest investors don’t ignore these three warning signs that will help them thoroughly understand market conditions.
Should you buy Nvidia stock now?
Before buying Nvidia stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks What investors can buy right now…and Nvidia wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
when to think about it Netflix This list was created on December 17, 2004…if you invested $1,000 at the time of recommendation. you have $530,233!* or when Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $1,119,682!*
Now, the important thing to note is that stock advisor Total average return is 955% — compared to the S&P 500’s 191%, which is an overwhelming market outperformance. Don’t miss our latest Top 10 list. stock advisorjoin an investing community built by retail investors, for retail investors.
See 10 stocks »
*Stock Advisor will return on March 11, 2026.
Neil Patel has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
