Eye for AI: Stocks recover as tech giants spend big on AI infrastructure — what lies ahead?

As the tech world continues its AI-driven transformation, Wall Street is responding with renewed enthusiasm. After weeks of market volatility, U.S. and global equity indices showed signs of recovery, driven largely by investor optimism around artificial intelligence (AI) infrastructure spending. Big tech players like Microsoft, Alphabet, Amazon, and Meta are pouring billions into building and upgrading data centers, investing in custom chips, and securing high-end GPUs. This capital deployment is not just reigniting the tech sector—it’s giving a broader boost to market sentiment.

AI Spending Sparks Market Revival

The Nasdaq Composite, heavily weighted by technology stocks, rebounded 4.2% last week, erasing early May losses. The S&P 500, too, climbed 2.8%, buoyed by gains in semiconductor, cloud computing, and software firms. Analysts credit the recovery to corporate earnings calls that emphasized aggressive AI investments and expanding demand for AI-enabled services.

“AI has shifted from a buzzword to a core driver of business strategy,” said Catherine Li, Senior Analyst at MorganTech Capital. “The multi-billion dollar infrastructure investments being made today will lay the groundwork for exponential AI utility in sectors ranging from finance to healthcare and logistics.”

Big Tech’s Billion-Dollar Bet

• Microsoft confirmed it will invest over $10 billion in AI infrastructure in 2025, including new data centers and partnerships with chipmakers like AMD and Intel. CEO Satya Nadella highlighted the need for “hyper-scalable” environments to support Azure’s AI services.

• Alphabet’s Google Cloud unit plans to double its AI server footprint, signaling long-term commitment to enterprise AI adoption.

• Amazon Web Services (AWS) announced Project Titan, a next-gen AI cluster project aimed at training foundation models faster and more efficiently.

• Meta Platforms is also scaling up, with over 350,000 H100 GPUs deployed in the first half of 2025 for its Llama-based AI research.

The scale of these investments reflects a broader belief that AI isn’t just the next chapter of tech—it is the story.

Semiconductors and Data Infrastructure Ride the Wave

This surge in spending is a windfall for hardware and semiconductor firms. Nvidia shares jumped 12% in the past two weeks after it raised full-year guidance, citing “unprecedented demand” for AI chips. Broadcom, Micron, and Marvell Technologies also posted double-digit gains, fueled by orders tied to AI data centers and high-bandwidth memory (HBM) components.

“The supply chain for AI infrastructure is becoming the hottest part of the market,” said Alejandro Torres, an investment strategist at Echelon Funds. “This isn’t a one-quarter spike. We’re entering a multi-year investment cycle.”

Caution: Valuation and Execution Risks

Despite the optimism, not all analysts are fully convinced. Some warn that AI hype could lead to overvaluation, especially in companies with vague or unproven AI strategies.

“Not every firm that mentions AI on its earnings call is creating real value,” cautioned Priya Menon, Equity Strategist at Zenith Partners. “Investors should differentiate between genuine AI infrastructure plays and speculative narratives.”

There are also concerns about supply constraints, especially around high-end GPUs and data center cooling systems, which could delay project rollouts.

Investor Outlook: Chasing the Next AI Wave

For retail and institutional investors, the question remains: is this the beginning of another tech rally, or are we in the middle of an AI bubble?

Analysts generally agree that while valuations may face corrections, the underlying trend is durable. Long-term bets on companies enabling or effectively leveraging AI are likely to yield substantial returns. ETFs focusing on AI infrastructure, like the Global X Data Center REIT & Digital Infrastructure ETF (VPN) and ROBO Global Artificial Intelligence ETF (THNQ), have seen inflows spike by 18% month-on-month.

“Think beyond software,” said Torres. “Look at the physical backbone—semiconductors, cooling systems, edge computing infrastructure, even clean energy plays. These are the enablers of the AI era.”