AI Investment Frenzy: How Long Can the Boom Last?

 

The surge in artificial intelligence investments shows no signs of slowing. Last week, AI chip leader Nvidia announced plans to invest $100 billion to help OpenAI, the leading generative AI company, expand its data center network. Such massive funding raises questions: how can these investments be justified when the immediate returns remain relatively modest?

 

Massive Spending Worldwide

Global spending on AI is skyrocketing, projected to reach around $1.5 trillion by 2025 and exceed $2 trillion in 2026, nearly two percent of global GDP, according to Gartner. Despite limited short-term profits, investors are treating AI as a transformative breakthrough, comparable to the discovery of electricity, says Denis Barrier, head of Cathay Innovation.

 

Silicon Valley’s approach emphasizes opportunity over risk. Geopolitical pressures are also driving the rush to build enormous data centers, which host thousands of high-cost chips and require substantial electricity and cooling systems. From 2013 to 2024, U.S. private AI investment totaled $470 billion, with almost a quarter in the past year alone. China follows with $119 billion, according to Stanford University research. OpenAI has emerged as the primary recipient, raising $40 billion in March 2025 and reaching an estimated $300 billion valuation.

 

Circular Funding and Investment Strategies

OpenAI now ranks as one of the most valuable private companies globally, surpassing SpaceX in employee share deals. The company oversees the Stargate project, which has already secured $400 billion of the $500 billion planned for Texas data centers by 2029, with support from major investors like Softbank, Oracle, Microsoft, and Nvidia. Nvidia has faced criticism for “circular funding,” investing in startups that use the funds to purchase its chips, a practice some analysts see as inflating a potential bubble.

 

In the first half of 2025, OpenAI reportedly generated $4.3 billion in revenue, yet unlike Meta or Google, it must continuously secure external funding to bridge the gap between costs and income. With ChatGPT serving over 700 million users globally—nearly nine percent of the world’s population in under three years—many AI supporters believe substantial revenue growth is inevitable.

 

Costs and Risks Ahead

Despite optimism, the scale of AI’s computational demands presents major financial and environmental challenges. Global data center investments may reach $500 billion annually through 2030, requiring around $2 trillion in annual revenues for viability. Even optimistic estimates suggest an $800 billion shortfall across the industry. OpenAI plans to spend over $100 billion by 2029, meaning profitability is still a distant goal. Energy consumption is projected to reach 200 gigawatts by 2030, half of which could occur in the United States—equivalent to Brazil’s total electricity use today.