The rise of large language model-based AI and OpenAI’s ascent over the last three years has triggered a response from the world’s biggest technology companies, each determined to secure a leading position in the field.
Major tech giants, often referred to as hyperscalers in the AI sector (Meta, Google, Microsoft and Amazon), have all launched aggressive initiatives to develop, deploy and ultimately dominate advanced AI technologies in the years ahead.
AI spending splurge
As the race intensifies, these companies are competing fiercely for top AI talent, offering extraordinary compensation packages while pouring vast resources into data centre expansion and corresponding energy infrastructure. Meta, for instance, has reportedly proposed multi-year pay packages worth up to $100mn to attract leading AI engineers. Amazon has unveiled plans to invest over $500mn in nuclear power facilities to meet its data centre needs, while Microsoft is working to develop small modular reactors (SMRs) as part of its strategy.
This energy land-grab represents an existential threat to the crypto mining sector. Bitcoin miners, who historically acted as the grid’s buyer of last resort for cheap excess power, are now competing against hyperscalers with virtually infinite balance sheets. As Big Tech monopolizes base-load power, miners are increasingly being priced out of the grid or forced to pivot their infrastructure toward AI compute just to remain profitable.
A significant rise in overall capital expenditure has accompanied all of this. The projected capital expenditure has increased from $156bn in 2023 to a projected $362bn in 2025.
Role of OpenAI and Nvidia
AI hardware is largely provided by Nvidia, software primarily by OpenAI. While other players exist in this space, these two are the market leaders influencing the whole gameboard.
Nvidia was long known primarily as a graphics card maker, powering video games and high-end visual computing. But over the past decade, it has transformed itself from a gaming hardware specialist into the central infrastructure provider of the AI era. That shift was enabled by its early development of CUDA, a software framework that allowed its GPUs to perform the massively parallel calculations required for advanced machine learning.
Nvidia’s largest customers are the world’s major cloud providers (Amazon, Microsoft, Google, Meta, Oracle, Tencent, Alibaba and Baidu), which buy its chips in enormous volumes to power data centres and train advanced AI models. These companies are joined by leading AI developers such as OpenAI, Anthropic, Cohere, Mistral and xAI. Nvidia’s quarterly earnings reports have become a market mover in their own right, with an impact stretching beyond the company itself. As a proxy for AI investment, it now impacts broader stock market sentiment and even broader macro sentiment indicators.
OpenAI has played a central role in bringing advanced AI to the mainstream by developing powerful language models and making them accessible through widely used tools, mainly ChatGPT. Since its launch three years ago, OpenAI has played an increasing role among big tech as companies rush to ensure market dominance by integrating the technology into offerings like cloud computing.
To ensure its own dominance and chase the firepower needed to support its AI solutions, OpenAI has engaged in circular financial arrangements with some of the key players in the field as it seeks to spend $1tn on computing infrastructure. To meet these spending needs, OpenAI is getting involved in various types of complex financial agreements between main players, including Nvidia, AMD, Oracle, CoreWeave and others.
Spending and market
To support spending on AI, big tech companies initially relied on balance-sheet cash or internally generated free cash flow. They are now relying more heavily on external financing. Increasingly, these companies are tapping both public bond markets and private lending channels to secure additional capital for their expansion plans.
Initially welcomed by the market, the continuous investment splurge by big tech has recently taken a hit as the market sobers to the spending reality. This has been reflected in both stock prices and bond spreads.
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As big tech increases its reliance on financial markets to finance investments, corporate spreads have started to grow again since September. Although a way off from the April highs, the spreads have recently widened.
All five companies covered (excluding Oracle) have a high credit rating of AA- or better. In addition, the technology sector has lately enjoyed relatively favourable borrowing conditions as broader market risk spreads have remained tight by historical standards. However, as the tide shifts and tech giants engage in further spending on a promise of unguaranteed future gains from AI, the market will start to question the investment splurge and ask for an additional premium.
More broadly, markets also need to account for the shift underway at major tech companies as they transition from traditionally asset-light service models toward far more capital-intensive operations. That evolution will reshape their revenue profiles and profitability over time, a change that investors must weigh alongside the long-term potential of the AI growth story and its expected future returns.
Along with the increase in capital expenditure and slightly widening credit spreads, there has been a decline in stock prices that has taken Bitcoin along with it. In the month of October, the hyperscalers largely saw a decrease in their stock price as the market evaluated the utility of their investments.
Bitcoin and the market
Bloomberg data shared by The Kobeissi Letter shows that Bitcoin’s 30-day correlation with the Nasdaq 100 has climbed to around 0.80, its strongest link since 2022 and the second-highest reading in almost ten years. As that has happened, Bitcoin prices have also decoupled from gold.
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Wintermute analysts say Bitcoin is now acting like the "high-beta tail of global risk," meaning it gets hit hard when macro sentiment turns negative but doesn’t enjoy the same degree of upside when equities recover. The drop in retail participation has thinned out Bitcoin’s market depth, leaving it more exposed to sharp moves and sustained selling pressure. Several indicators point in this direction: trading volumes on major exchanges continue to decline, stablecoin issuance has stagnated, institutional inflows are steady but far from strong, and market makers appear to be prioritizing caution over growth.
