Nvidia’s earnings could answer the AI bubble question and upend global markets in moment of truth for Magnificent 7

Essentially, this describes the current state of the worldwide stock market and the dilemma every tech CEO and asset manager must confront: Is AI a bubble, or isn't it? 

Much is at stake. 

Approximately 75% of the S&P 500's gains since the current bull market started in October 2022 can be attributed to just seven companies:Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia, and Tesla. As of mid-November, these Magnificent Seven companies collectively hold a market capitalization of around $21.5 trillion.

Big Tech's strategies, Apple’s perhaps excepted, rely significantly on AI. However, should AI fail to generate the anticipated revenues or efficiencies, stock markets could face substantial repercussions, given the unparalleled concentration of global investable assets in AI and related stocks.

The S&P 500 had risen 14.7% this year (at the time of writing), repeatedly breaking new record highs. But 40% of the index’s value comes from the 10 biggest stocks within it, all but one of which are tech companies.

A significant portion of these corporations are consequently investing heavily in AI to create new data centers, advanced language models, and the substantial energy required for them. Goldman Sachs projects that AI capital spending will reach $390 billion in the current year and grow by an additional 19% by 2026. Bank of America holds an even more optimistic outlook: It projects that AI capex will hit $1.2 trillion in 2030. 

The recipients of the lion’s share of that money are 10 AI companies that are interlocked with one another as customers and investors in an “increasingly circular” way, as a recent research note from Morgan Stanleydescribed it. That note referenced relationships between OpenAI, Nvidia, Oracle, Microsoft, CoreWeave, and AMD, involving billions in equity stakes, revenue sharing, vendor financing, and “repurchase agreement[s]” being passed back and forth among them. 

To a degree, this is typical; many sectors have groups of businesses that engage in transactions with each other. The issue within AI lies in the fact that the income AI firms are presently earning is significantly less than the capital expenditure being invested in them by The Magnificent Seven.

Rough calculations indicate that AI capital expenditures from S&P 500 tech firms will exceed $400 billion annually going forward. OpenAI, the developer of ChatGPT and the leading AI firm, reported revenues of only $13 billion for 2025. Altman recently said revenues were “well more” than that suggested that revenues might reach $100 billion by 2027, yet this figure remains significantly lower than the capital investment being made. 

Microsoft's disclosure indicates OpenAI might have incurred a loss of $12 billion during the third quarter of 2025, given Microsoft's 32.5% ownership. Despite this, the company plans to invest $1.4 trillion in product development, with venture capital and other investors valuing it at $500 billion. 

These numbers don’t add up—and won’t until the massive AI rollout starts to yield real financial benefits. “That is exactly the discussion in the market at the moment. Can the 10 AI companies generate enough revenue to justify the capex?” Says Torsten Sløk, chief economist at Apollo Global Management.

Should the answer to that question be no, or more critically, not in time to meet investors' future expectations, the repercussions in worldwide stock markets might be severe. 

Consider the Russell 2000, which tracks small U.S. Businesses; 806 of these, approximately 40%, report no profits or losses. Surprisingly, according to Apollo, shares of these unprofitable Russell firms have performed better than those that were profitable this year. The majority of these money-losing businesses are in the tech sector, benefiting from the AI trend.

As the Magnificent Seven continues to lead large-cap stocks and money-losing small-caps surge on AI optimism, any shift in sentiment could have broad effects, particularly if AI infrastructure spending slows. The wider impact on equity markets might be even more significant.

From 1990 onward, American holdings of every description—equities, fixed income, real estate, and so forth—have gained significant global prominence. Christian Mueller-Glissmann, a managing director and the head of asset allocation research at Goldman Sachs, states that U.S. Equities now constitute roughly 60% of the total market value of all stocks worldwide. Furthermore, S&P Global reports that technology shares make up approximately 45% of all U.S. Stocks, valued at $26 trillion or higher as of the end of October.

Currently, the majority of global assets resemble an inverted pyramid, precariously balanced on its apex. The broad upper section is primarily composed of U.S. Stocks, with their performance dictated by a mere seven publicly traded tech firms. These seven companies are financing approximately ten smaller, privately held AI enterprises, on whose success they now depend. These AI companies, situated at the pyramid's base, are predominantly not generating profits. 

For that reason, owning the S&P 500 via an exchange-traded fund, traditionally one of the safest and most common bets for smaller “retail” investors, isn’t providing the diversification it used to. Today, it’s largely a bet on a few globally massive tech platforms—concentrating millions of people’s retirement savings toward the tip of that pyramid.

According to Mueller-Glissmann, the global reliance on U.S. Stocks is partly due to the U.S. Being the world's largest economy, meaning the concentration proportionally mirrors economic conditions. However, this also implies that a bubble in U.S. Equities would mean the entire world is experiencing a bubble, regardless of our preferences.

Mueller-Glissmann notes that U.S. Stocks have significantly outpaced foreign stocks due to a greater concentration of finance and tech companies in the U.S. Compared to other nations. These industries benefit from substantial operating cost leverage, meaning they can boost revenues without a proportional increase in personnel or assets. For instance, an application serving 200 million users won't incur double the operational expenses of one with 100 million users, whereas a gold mining operation aiming to double its output would likely need to double its expenditures on equipment and labor. 

America has an enormous amount of this “financialization,” Mueller-Glissmann says. “That makes [the] argument a bit more scary, in the sense that this world portfolio is getting more and more important for the global economy in terms of driving wealth effects and in terms of driving financial conditions.

Over the coming year, investors will closely monitor AI's revenue trends. Currently, Goldman Sachs, J.P. Morgan, Apollo, and Bank of America have released research or informed Coins2Day that they anticipate AI capital expenditure growth will remain strong until 2026. This suggests the current market enthusiasm has further room to run. The usual recommendation is to sell, but not yet! (Refer to the subsequent pages for specific investment suggestions.) 

At some point, the tide will go out, and stock investors, venture capital firms, and Big Tech’s AI capex “hyperscalers” will all want to know who has a viable business and who is swimming naked, according to Lisa Shalett, Morgan Stanley Wealth Management’s chief investment officer. That, in turn, could be the catalyst for a much broader stock market reckoning. 

Shalett contends that the present era of American exceptionalism, characterized by the dominance of U.S. Firms and investments worldwide, is poised to conclude during what she terms a “great rebalancing.”. She further noted in a recent client communication that this eventual shift will extend its influence beyond just those businesses directly involved in the AI surge. 

Since the financial crisis of 2008, Shalett argues, American stock market outperformance relative to the rest of the world has been “‘supercharged’ by historic monetary policy intervention” that kept interest rates near zero; deficit spending and fiscal stimulus, including about $4.6 trillion in relief outlays at the height of the COVID pandemic; “and the fruits of globalization, which were enhanced by the privilege of having the world’s reserve currency.” Those factors, Shalett believes, are likely to phase out over the next five to 10 years, with negative implications for U.S. Stocks across the board. 

The AI bubble query becomes even more significant at this point. Investors have overlooked a continuous stream of concerning economic signs over the last year, influenced by exaggerated forecasts of AI's financial advantages. Should AI's actual performance fall short of expectations, a rapid downturn might ensue.

As global trade costs rise due to President Trump's tariffs, inflation becomes a persistent economic reality, and the U.S. Might face bond market demands to address its fiscal deficit, investors will probably be hesitant to invest if they perceive that dependable earnings-per-share expansion has given way to risky speculation. 

“People realize that there’s only so much of this story that you can price into the future without the ‘Show me the money’ moment,” Shalett tells Coins2Day. “We think we’re pretty close to the moon already.” And if asset values come back down to earth, the challenge will be to avoid burning up on reentry.

A boom for the few

This article appears in the December 2025/January 2026 issue of Coins2Day with the headline “How an AI bubble could ruin the party.”