As Big Tech’s AI investment continues growing to mind‑bending scale, investors are trying to work out whether the returns are finally showing up in real revenues and improving margins – not just expectations.

The latest earnings season suggests the answer is encouraging, though not definitive.

Strong first‑quarter results from the world’s largest technology companies helped support markets, even as the war in Iran pushed oil prices higher and raised concerns about inflation and geopolitical risk. For now, tech strength has acted as a powerful offset, helping anchor market sentiment despite the noise.

Hype meets reality

“The investment that’s been made by these AI companies is so huge – expected to be around $US750 billion this year,” Milford Head of Global Equity Research Frances Sweetman said in Episode 74 of Bridge talks Business.

“That’s nearly three times New Zealand’s entire GDP. And at the moment, the revenues aren’t high enough to demonstrate they’re going to deliver a really good return on that investment.”

While questions remain about whether AI investment is running ahead of reality, this earnings season suggests investor focus is shifting from ambition to execution. Sweetman said the key issue is not whether returns are fully apparent yet, but how effectively the investment is being monetised – primarily through subscription pricing and usage‑based fees so far.

Revenues accelerating without a matching CapEx lift

“What we have seen this year is those revenues really start to accelerate,” Sweetman told host Ryan Bridge.

“Anthropic has been able to quadruple its revenues since launching its latest model earlier this year – and capital expenditure isn’t quadrupling. Margins from the likes of Google and Amazon have also slightly improved.

“That’s really important. It signals that even though these investments aren’t delivering the returns they need to yet, they potentially will, as they’re monetised.”

For now, Sweetman explained, markets appear comfortable taking the risk. But with investment running at unprecedented levels and expectations continuing to build, AI remains a sector where sentiment can turn quickly – and where the next phase of earnings will matter far more than the hype that came before it.

Catch the full conversation between Ryan Bridge and Frances Sweetman in Bridge talks Business episode 74.