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Nvidia's ( NVDA ) boosters keep saying the AI revolution is in its early stages. But a reckoning of Big Tech’s AI spending is already brewing, highlighting a disconnect between the tech’s supposed world-conquering potential and the absence of meaningful returns on investment for companies not named Nvidia. (Fortune reported recently that other Big Tech employees are getting jealous of Nvidians , as they're called.)
That snag was on full display during Nvidia’s earnings call . Several analysts asked CEO Jensen Huang about where all that AI money is going and how the company views questions about the industry’s massive capital expenditures and their more speculative returns.
For Nvidia, a few other hardware companies, and AI bulls, those returns are already here. But for everyone else in Big Tech and beyond, the results are harder to see .
Can the hype over AI simultaneously be at the end of its cycle and the beginning of another? It seems to depend on your timeline. And whether investors can accept retreating from exponential gains to merely linear forward progress.
Looking beyond Nvidia’s earnings stumble — where the company beat expectations but didn’t pulverize them as in prior blockbuster quarters — the appetite for AI investments doesn't seem close to being met.
But while it’s true the AI trade no longer resembles the meme-coin frenzy of its earlier days, the latest wave of scrutiny over AI spending registers more as a slight recalibration than a paradigm shift.
Take OpenAI’s latest reported valuation. On the same day Huang was fielding stubborn queries about ROI, the Wall Street Journal reported the AI darling that kicked this whole thing off was in fundraising talks valuing the ChatGPT maker above $100 billion.
A valuation on par with that of Starbucks ( SBUX ) and BP ( BP ) suggests there is enough hullabaloo that we are still far away from an abandonment or pullback. Still, naysayers might say that the financial excitement surrounding OpenAI might not be the most reliable measure of the viability of AI technology.
Meanwhile, the tech giants are still in investing mode. And for all the chatter of an unsustainable AI moment, of ballooning capex, and of uncertain revenue streams, Big Tech’s CEOs are fully onboard. That goes a long way in explaining Nvidia’s 122% revenue growth.
But it also underscores another mismatch between providing AI chips and promising revolutionary, unproven software that relies on those chips. Nvidia's unique growth story is reliant on the tech platforms' AI aspirations.
Demand for Nvidia’s hardware continues to soar as tech companies fuse their identities and their spending to AI. But at some point, investor gripes over tangible returns may lead to a scale-back that will hurt Nvidia. For now though, Big Tech CEOs have bet so big at the AI casino that it's hard to fathom what would convince them to pack up and stumble home. When you are high enough on the org chart, sunk costs lose meaning. Loss chasing can be mistaken for perseverance.
Now that all the major AI players have reported, does the tech world's uneven earnings season represent a buying opportunity or a turn to a more exacting appraisal of AI's true worth? Until the investments slow, it will be hard to know.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban .