The boom in artificial intelligence (AI) stocks continues to capture investors’ attention, but some key players like Nvidia (NVDA) and Microsoft (MSFT) are now facing intense scrutiny as expectations soar. As AI technology progresses, particularly with the rise of generative AI, the industry’s landscape is shifting — and not without its challenges.
For major companies like Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META), generative AI offers both opportunities and risks. While the hype surrounding AI remains strong, recent developments, such as those at Super Micro Computer (SMCI), call for caution.
The big question is whether the AI stock market boom is sustainable, especially with the unexpected emergence of China’s DeepSeek. This AI startup has introduced a powerful AI training model using significantly less computing power, raising concerns about the future of capital spending in AI infrastructure. As a result, some AI stocks, including Nvidia, saw sell-offs, and analysts are now questioning whether high expectations can translate into actual returns.
Cloud Computing Giants’ Capital Spending Surge
In 2025, cloud computing leaders are expected to ramp up investments in AI, reflecting the technology’s massive potential. Amazon CEO Andy Jassy has referred to AI as the “biggest opportunity” since cloud computing and possibly the most transformative business shift since the internet. Major AI-driven capital expenditures are expected, especially from cloud giants, who are set to spend heavily on AI-related technologies.
Nvidia, for instance, is gearing up for a significant ramp-up in the production of next-generation AI chips, known as Blackwell, in 2025. Despite its efforts, Nvidia’s stock has seen a 3% decline in 2025, mirroring the broader uncertainty around AI infrastructure investments.
China’s DeepSeek Shakes the AI Market
DeepSeek’s surprise entry into the AI space has sent ripples through the market. The Chinese startup’s release of an AI training model with far less computing power than traditional models has raised new questions about the sustainability of AI-related capital spending. This new development has cast a shadow over the market, contributing to a broader sell-off in AI stocks.
Despite the challenges, AI’s commoditization could drive application development. While “training” AI models has been a dominant force driving capital investment, the future could see a shift toward “inferencing” — the running of AI applications — which is expected to be less capital-intensive in the long term.
Software Companies Seek AI Growth
As software companies struggle to generate significant revenue from “copilots” — AI-powered assistant tools — many are shifting their focus to AI agents. Companies such as Palantir (PLTR) have bucked the trend, with a 46% jump in their stock value in 2025, following a 340% surge in 2024.
Meta, on the other hand, has seen a remarkable 22% increase in its stock price as its AI initiatives gain momentum. The company now claims over 700 million monthly users of its AI assistant and expects this number to hit 1 billion by 2025. Meta is also rumored to be preparing to launch an AI-driven search engine, potentially challenging Google’s dominance in the space.
Apple, Amazon, and Meta’s AI Efforts
While companies like Apple (AAPL) have struggled in 2025, with stock down 9%, others are positioning themselves more aggressively in AI. Apple’s role in AI remains under scrutiny, especially with its upcoming iPhone 16 model, but so far, it hasn’t sparked a significant AI-driven upgrade cycle.
Meta stands out with its bold moves in AI. In addition to its AI-powered social media tools, Meta’s leadership has shown that it’s actively investing in AI capabilities, hiring top talent from Salesforce to build its AI-focused team.
Amazon, too, is making strides in AI, with its Alexa voice assistant set to receive significant updates. The company is working with AI startups and rivals like Anthropic, Hugging Face, and Falcon 40B to compete in the generative AI space.
Capital Spending Concerns and Semiconductor Stocks
In 2025, semiconductor companies continue to outperform software stocks in the AI sector. Chipmakers like Broadcom (AVGO) are seeing a surge in demand due to AI chip requirements from cloud computing giants. Qualcomm (QCOM), ARM Holdings (ARM), and Marvell Technologies (MRVL) are also expected to benefit from the growing AI market.
However, AI chip export restrictions remain a concern for major players like Nvidia and Advanced Micro Devices (AMD), potentially limiting growth prospects in this area.
The ‘Show Me’ Moment for AI Stocks
As AI technology continues to evolve, investors are increasingly demanding tangible results from tech companies that have touted AI investments. According to a Bank of America report, AI has shifted from a “tell me” story to a “show me” story, meaning that investors will be more focused on whether companies can effectively monetize AI technologies.
Software companies like Microsoft and Oracle, with investments in OpenAI, are at the forefront of this transition. Meanwhile, startups like OpenAI and Anthropic are competing with tech giants in developing advanced AI models.
The next few years could see a shift from AI’s development phase to a more mature market, with companies vying to gain competitive advantages by developing industry-specific AI applications. The question remains whether established players will dominate or if new startups will take the lead in the generative AI race.
AI Stocks to Watch
Among the top AI stocks to watch, Nvidia (NVDA) leads the semiconductor space, while CrowdStrike (CRWD) focuses on using AI for cybersecurity. Arista Networks (ANET) plays a crucial role in expanding AI infrastructure by providing networking solutions for hyperscale data centers. Microsoft and Salesforce (CRM) continue to integrate AI into their software platforms, while Amazon’s Alexa assistant is gearing up for its own AI advancements.
AI stocks are under increasing pressure to prove their value. While the potential is immense, the focus is now on whether investments in AI will translate into long-term profitability for these tech giants. With new competitors and evolving technologies, investors will be watching closely to see how AI stocks perform in this new “show me” era.
Related topics:
What is the Minimum Stock Price for TSX?
What Stocks Are in Berkshire Hathaway B Stock?
Earnings Season Takes Center Stage as Markets Stabilize Amid Trade War Concerns
