AI 2.0: The hype is over and it is time to monetise

The AI boom is entering a new phase. In 2025, investor focus is shifting from bold promises to measurable profits, putting pressure on tech giants to turn record investments into real returns, says Rosen Traykov, Senior Writer at XMTrading

 
 

The summer of 2025 brings a noticeable shift in the financial markets, especially for companies that may have relied too heavily on the now-familiar two-letter acronym – AI. A couple of years ago, investors were buzzing with euphoria around artificial intelligence plays. Just the mention of AI in the earnings call could inflate valuations. This year, investor sentiment has evolved. Capturing investor attention today requires more than hype and ambitious growth projections – it demands solid earnings growth.

The first wave: narrative over numbers
The first wave of AI enthusiasm, spanning 2023 and 2024, was driven by compelling narratives and substantial investment inflows – amounting to hundreds of billions of dollars. Many companies capitalised on the excitement, often without the earnings to justify the momentum. An elite group of seven companies didn’t need blockbuster profits to attract matching inflows.

Their rocketing valuations were driven more by future potential rather than present performance. These seven names – Microsoft, Google parent Alphabet, Tesla, Amazon, Apple, Facebook parent Meta and Nvidia – emerged as the chief architects of the AI-fuelled revolution and saw their share prices soar to record highs. Collectively known as the ‘Magnificent Seven,’ they are the tech giants that are in a race to build the infrastructure layer so AI can thrive.

What is the common ground between the first six companies? They are all major customers of Nvidia, apart from Apple, which spends a tiny amount of money on Nvidia hardware. All the rest are buying boatloads of Nvidia chips to train their large language models (LLMs) and fuel their AI capabilities. This is how Nvidia sparked the AI rally – and the gains followed.

Is Nvidia losing investor confidence?
Nvidia’s shares were up 239 percent in 2023 and another 171 percent in 2024. However, despite strong fundamentals, the tech heavy-weight has been struggling to gain traction in 2025. At the start of the year, a whopping 114 percent annual revenue increase was not enough to get traders and investors racing to load up on the shares. Nvidia reported $130.5bn in revenue for 2024 (fiscal 2025) – more than double the $60.9bn it posted the previous year.

The companies that can turn AI innovation into consistent, long-term profits will stand out

Investors’ reaction? A few polite claps, some yawns, and just enough buying momentum to keep Nvidia’s shares steady after the February 26 earnings report, which included fiscal 2025 performance. The market’s muted response suggested that even sky-high expectations may have already been priced in. Does this mean investors are becoming less interested in fundamentals and more attached to the idea of stratospheric growth? After all, Nvidia set the bar high in the fourth quarter of 2023, crushing Wall Street’s expectations with an explosive 265 percent year-over-year revenue jump.

As the AI sector evolves, differentiation will be key. Investors are now paying closer attention to fundamentals: sustainable margins, monetisation strategies, and disciplined capital spending. The companies that can turn AI innovation into consistent, long-term profits will stand out. At the same time, others may struggle to justify their elevated valuations in a market that’s increasingly focused on earnings. Before those earnings have a chance to materialise, some spending must take place – and given time to yield results.

Capex: A hero or a villain?
Capital expenditures, or capex, refer to the amount of money a company allocates for investment in innovation, upgrades and new assets like hardware or software. In the context of AI, companies usually spend on purchasing high-performance computing hardware and building data centres to support it. Unlike operating expenses, which cover day-to-day costs, capex is focused on projects that are expected to deliver value over years, even decades.

Capex does not always sit well with investors, because these kinds of investments require patience and long-term vision. This is where the market tends to split – between those with the discipline to wait for long-term value and those chasing quick wins.

The year of big investments
That is a distinction the market’s biggest players appear to understand well – even if it means being misunderstood by investors. The Magnificent Seven has turned this year into a year of bold investments, showing a solid conviction in the future of artificial intelligence through record levels of capital expenditure.

Microsoft has committed $80bn to expand its data centres and build its AI infrastructure. This daring investment effort is designed to power its Azure cloud platform and its broader enterprise ecosystem. Microsoft’s AI chatbot Copilot is expected to become a mainstay tool for both businesses and consumers aiming to optimise their workflow and daily tasks.

As an early backer of ChatGPT parent OpenAI, in which it holds a 49 percent stake following a bold $13bn bet, Microsoft has positioned itself front and centre in the generative AI space. Close behind is Google’s parent Alphabet, which has earmarked around $75bn for similar initiatives. The commitment reinforces the search giant’s position in AI research and cloud services.

The Magnificent Seven has turned this year into a year of bold investments

A significant portion of it supports the development of Gemini – Google’s flagship generative AI model and a direct competitor to both ChatGPT and Copilot. Amazon is making the boldest move of all, with capital expenditures exceeding $100bn for 2025. Much of that spending will be funnelled into AI infrastructure for Amazon Web Services (AWS) – the backbone of its enterprise operations and a major driver of its profitability.

Similarly, Meta has revised its outlook sharply upwards, committing a totoal of between $60bn and $65bn – a nearly 70 percent increase over prior projections. The lion’s share of that big-ticket spending will go towards building warehouse-size data centres to power the AI products across the company’s apps, which include Facebook, Instagram and WhatsApp.

The rest of the Magnificent Seven group, Apple, Tesla and Nvidia, have not disclosed official capex projections. Still, their forward guidance and spending activity suggests continued, sizable investment in AI and related technologies. For Apple, the focus is on developing AI-enabled iPhones powered by Apple Intelligence, the tech titan’s way of catching up in the AI race. For Tesla, it is the autonomous driving capabilities through Full Self-Driving, the EV maker’s highest-level driver assistance software.

For Nvidia, it is about the continued innovation in GPU and chip manufacturing, with Blackwell as the next big thing that should keep demand growing. These are only some of the ways these tech leaders are positioning themselves for long-term relevance.

A new era in the works
Taken together, this wave of capital investment in 2025 – totaling over $300bn among the top players alone – signals more than just an optimistic note. It reflects a fundamental shift in how value will be created in the coming decade.

Despite market volatility, occasional pushbacks from investors, and macroeconomic challenges, these firms are not backing down on their bold investment initiatives. Instead, they are doubling down – investing today for tomorrow’s growth, fully aware that the returns may take time to materialise.

In AI 1.0, markets rewarded guidance and expectations. In AI 2.0, they reward performance. The speculative phase has given way to operational discipline and value creation rooted in the adoption of new technology.

High interest rates, compared to just four years ago, have reintroduced the idea that capital comes at a cost. This has brought a sharp focus on those who hold the upper hand. The big infrastructure players, with their pricing power and established supply chains, are the main winners.

What to expect in 2026
After a couple of years defined by euphoric share-price gains, followed by a breakneck rush to lay out infrastructure, the market is entering a new chapter – one grounded in execution, efficiency, and results. As we look ahead to 2026, three trends are likely to influence the AI earnings cycle.

Firstly, enterprise adoption becomes the real litmus test. Are companies paying for AI at scale? Are workflows evolving in ways that are both meaningful and monetisable? Do consumers need AI daily? These questions will take centre stage.

Secondly, margins will come under pressure. Infrastructure costs are high, and energy prices are rising. Companies with leaner and more efficient models will be better positioned to maintain profitability.

And thirdly, competitive moats will start to matter more. In the early innings of the AI race, ambition and access to capital were enough to keep companies in the game. By 2026, investors will want clear answers: Who owns the data? Who controls distribution? Who has proprietary models, scale advantages, or ecosystem lock-in?
As the space matures, staying power – not just innovation – will separate the frontrunners from the fading hype.