Op-ed: The fuel for the AI boom driving the markets is advertising. It is also an existential risk.

Published

8 hours ago

November 5, 2025

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Sam Altman, chief executive officer of OpenAI Inc., during a media tour of the Stargate AI data center in Abilene, Texas, US, on Tuesday, Sept. 23, 2025.

Kyle Grillot | Bloomberg | Getty Images

With OpenAI’s recent release of its AI browser, the historic level of capital expenditures being made in the current AI arms race may accelerate even further, if that is possible.

From the reciprocal, and some have said circular, nature of hundreds of billions in commitments in investment, tied to future chip purchases, to the extent to which GDP growth is reliant on this boom, some have said this is a bubble. A Harvard economist estimates 92% of US GDP growth in the first half of 2025 was due to investment in AI.

But much more needs to be understood about the connection between the breakneck investment in AI and the business models that underpins the entire economy: the advertising technology (Ad Tech) industrial complex.

For the past 25 years the infrastructure of the internet has been engineered to extract advertising revenue. Search Engine Marketing, the advertising business model at the core of Google, is perhaps the greatest business model of all time. Meta’s advertising business, based on engagement and attribution, is a close second. And right behind both of these is Amazon’s advertising business, powered by its position as the largest online retailer. While a smaller portion of Amazon‘s topline, its highly profitable advertising business makes up a disproportionate percentage of Amazon’s profits. So much so that nearly every major retailer has spun up their own version of retail media networks, all driving significantly to the bottom lines and market capitalization of massive companies like Walmart, Kroger, Uber (and UberEats), Doordash and many more.

In fact, these platforms have been using AI to refine their advertising business models for years, in the form of algorithmic models that powered their search and recommendation engines, and to increase engagement and better predict purchase decision, seeking an ever-greater share of all commerce, not just what is typically thought of as “advertising.” These three multi-trillion-dollar market cap companies either
wholly, or substantially, derive their profits from advertising. And now they are using some portion of those historically profitable advertising revenues to fuel infrastructure investments at a level the world has not seen outside of War Time spending by governments.

But at the same time, the latest wave of AI has the potential to disrupt the very same trillions in market cap that is fueling it. AI will, without question, change how people search (Google), shop (Amazon) and are entertained (Meta). Answers delivered without clicking around the web. AI-assisted shopping. Infinite personalized content creation.

If AI represents such a potential existential risk, why are Google, Meta and Amazon such a huge part of the current arms race to invest in AI? The “moonshot” outcome of would be that achieving Artificial General Intelligence, or Super Intelligence, AI that can do anything a human can, but better, would unlock so much value that it would dwarf any investment.

But there is more immediate urgency to protect, or disrupt, the advertising business model fueling the trillions in market cap and hundreds of billions of current investment, before someone else does. While the seminal paper that launched this phase of AI, “Attention is All You Need” was written by mostly Google researchers, it was OpenAI and Microsoft, and now Grok as well, that launched the current AI arms race. And they are not remotely as dependent on the current advertising industrial complex. In fact,
Sam Altman has called the feeds of the major platforms using AI to maximize advertising dollars, “the first at-scale misaligned AIs.” He is clearly stating which businesses he believes OpenAI is trying to disrupt.

What comes next?

This time is different, but it also comes with different risks. The major difference with the current fever in infrastructure investment vs the dotcom bubble of 2000, is that in large part the companies funding it are among the most profitable companies in the world. And so far, there has not been indications of cracks in the business model of advertising that is both funding their investments, and their market capitalizations (along with so many massive companies people wouldn’t think about being in the advertising business).

But if AI does disrupt, or even break, the current advertising model, the shock to the economy and markets would be far greater than most could imagine.

Google, Meta and Amazon are still best positioned to create new business models, and as mentioned, have been using AI for far longer to support their advertising business models with great success.

However, fundamentally changing the way people interface with search, commerce and content online will require just that, entirely new revenue models, maybe, hopefully, some that are aligned, that are not advertising based. But whatever the model, perhaps it is helpful to consider that the justification in AI
infrastructure spending may not be to just unlock new revenue, but to protect the business models that make up a much more significant portion of the market capitalization of public companies than most people are aware.

Technology

Doordash stock sinks 9% as company misses earnings, says it expects further spending

Published

3 hours ago

November 5, 2025

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Doordash stock sinks 9% as company misses earnings, says it expects further spending

A DoorDash bag on a bicycle in New York, US, on Tuesday, May 6, 2025.

Yuki Iwamura | Bloomberg | Getty Images

DoorDash reported third-quarter earnings that missed analyst expectations and said it expects to spend “several hundred million dollars” on new initiatives and development in 2026.

The stock sank 9% following the report.

Here’s how the company did compared to LSEG estimates:

Earnings: 55 cents per share vs 69 cents per share expected
Revenue: $3.45 billion vs $3.36 billion expected.

“We wish there was a way to grow a baby into an adult without investment, or to see the baby grow into an adult overnight, but we do not believe this is how life or business works,” the company wrote in its earnings release to explain the boosted spending.

DoorDash said it is developing a new global tech platform that progressed in 2025 but is expected to accelerate in 2026, noting the direct and opportunity costs in the near term. The company announced its Dot autonomous delivery robot in September.

The food delivery platform’s revenue increased 27% from a year earlier.

DoorDash posted net income of $244 million, or 55 cents per share, in Q3, up from $162 million, or 38 cents per share, a year ago.

Snap shares rocket 15% on strong forecast, $400 million Perplexity deal

Published

4 hours ago

November 5, 2025

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Snap shares rocket 15% on strong forecast, 0 million Perplexity deal

Snap shares climbed 15% on Wednesday after the company issued its third-quarter earnings, reporting revenue that beat analysts expectations and a $500 million stock repurchase program.

Here is how the company did compared with Wall Street’s expectations:

Earnings per share: Loss of 6 cents. That figure is not comparable to analysts’ estimates.
Revenue: $1.51 billion vs. $1.49 billion expected, according to LSEG
Global daily active users: 477 million vs. 476 million expected, according to StreetAccount
Global average revenue per user (ARPU): $3.16 vs. $3.13 expected, according to StreetAccount

Snap also announced that it is partnering with the startup Perplexity AI, which “will integrate its conversational search directly into Snapchat.” The feature is set to appear in Snapchat starting in early 2026, Snap said.

“Perplexity will pay Snap $400 million over one year, through a combination of cash and equity, as we achieve global rollout,” Snap said in the letter. “Revenue from the partnership is expected to begin contributing in 2026.”

The partnership represents “a first step in Snap’s effort to make Snapchat a platform where leading AI companies can connect with its global community in creative and trusted ways,” the two companies said in their announcement.

In the company’s earnings call, Snap CEO Evan Spiegel said Perplexity will have “default placement in our chat inbox” and the startup will “control the responses from their chatbot inside of Snapchat.”

Although Snap will not be selling “advertising against the Perplexity responses,” Spiegel said that the integration “will help Perplexity drive additional subscribers, which I think is something that will be valuable to their business.”

“We have a really unique opportunity ahead to help distribute AI agents through our chat interface,” Spiegel said.

While Snapchat users will still be able to engage with the company’s My AI chatbot, the integrated Perplexity AI service will provide them with “real-time answers from credible sources and explore new topics within the app,” the companies said.

Regarding Snap’s expensive foray into developing augmented reality glasses, Spiegel said the company plans to create a separate subsidiary around the Specs AR glasses to speed up development with partners.

Snap said fourth-quarter sales will come in between $1.68 billion and $1.71 billion. That figure’s midpoint of $1.695 billion is slightly ahead of Wall Street expectations of $1.69 billion.

For the third quarter, Snap said sales grew 10% year over year while it logged a net loss of $104 million. During the same quarter last year, Snap recorded a net loss of $153 million.

The Snapchat parent said that third-quarter adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, came in at $182 million, ahead of the $125 million that StreetAccount was projecting.

The company also said that its adjusted EBITDA for the fourth quarter will be between $280 million and $310 million, which tops StreetAccount’s projections of $255.4 million.

Snap shares were down 32% for the year, as of Wednesday’s close, compared to the Nasdaq’s 22% gain.

Although the company’s shares soared as high as 25% in after-hours trading on Wednesday, they began their descent after Snap finance chief Derek Andersen detailed some of the company’s sales-related challenges on the earnings call.

“The North America LCS segment remains the primary headwind to our overall revenue growth,” said Andersen, adding that the company is seeing more growth and demand for Snap’s ad products from small-to-medium sized businesses in other regions.

In a letter to investors, Snap said that government regulations like Australia’s social media minimum age bill and related policy developments “are likely to have negative impacts on user engagement metrics that we cannot currently predict.”

“While we remain committed to our goal of serving 1 billion global monthly active users, we expect overall DAU may decline in Q4 given these internal and external factors, and as noted above we expect particularly negative impacts in certain jurisdictions,” Snap said in the letter.

The Australian senate passed the bill in November 2024, and when the law comes into effect next month, companies like Facebook and Instagram parent Meta, TikTok and Snap will be penalized if they fail to adequately prevent children under 16 from possessing accounts on their respective platforms.

Snap also said in the investor letter that the “upcoming rollout of platform-level age verification” from companies like Apple and Google could also negatively impact user metrics in the future.

Utah and California have signed online-child safety bills that put the onus on app store makers to verify user ages. Utah’s law is set to fully take effect in May 2026.

“We are also preparing for the upcoming rollout of platform-level age verification, which will use new signals provided by Apple — and soon Google — to help us better determine the age of our users and remove those we learn are under 13,” Snap said in the letter.

Snap’s warning to investors underscores how new laws, policies and regulations around the globe are beginning to impact tech firms.

In the letter, Snap also said that some of its efforts to improve monetization, such as its Snapchat+ subscription service, could result in “adverse impact on engagement metrics as these experiences are rolled out globally.”

Pinterest shares tanked on Tuesday after the company reported third-quarter results that missed on earnings per share and provided weaker-than-expected guidance. The company’s finance chief Julia Donnelly told analysts that Pinterest expects “broader trends and market uncertainty continuing with the addition of a new tariff in Q4 impacting the home furnishing category.”

Big tech companies like Meta, Alphabet and Amazon reported their latest quarterly earnings last week in which they posted solid digital advertising sales and hefty spending on AI-related computing infrastructure.

The Facebook-parent saw third-quarter sales boom 26% year-over-year to $51.24 billion, while revenue in Amazon’s online ad unit soared 24% year-over-year to $17.7 billion.

Alphabet said that its total advertising revenue for the third quarter rose 13% year-over-year to $74.18 billion, while YouTube’s online ad sales climbed 15% to $10.26 billion.

Reddit said last Thursday that third-quarter sales surged 68% year-over-year to $585 million. The company’s global daily active uniques increased 19% year-over-year to 116 million, surpassing estimates of 114 million.

WATCH: It would be irresponsible of Zuckerberg to not spend on his network of properties, says Jim Cramer.

Technology

New bipartisan bill would require companies to report AI job losses

Published

6 hours ago

November 5, 2025

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New bipartisan bill would require companies to report AI job losses

A pedestrian walks past Amazon Ireland corporate offices in Dublin, as Amazon.com, Inc., said on Tuesday it plans to cut its global corporate workforce by as many as 14,000 roles and seize the opportunity provided by artificial intelligence (AI), in Dublin, Ireland, Oct. 28, 2025.

Damien Eagers | Reuters

A new bipartisan bill seeks to provide a “clear picture” of how artificial intelligence is affecting the American workforce.

Sens. Mark Warner, D-Va., and Josh Hawley, R-Mo., on Wednesday announced the AI-Related Job Impacts Clarity Act. It would require publicly traded companies, certain private companies and federal agencies to submit quarterly reports to the Department of Labor detailing any job losses, new hires, reduced hiring or other significant changes to their workforce as a result of AI.

The data would then be compiled by the Department of Labor into a publicly available report.

“This bipartisan legislation will finally give us a clear picture of AI’s impact on the workforce,” Warner said in a statement. “Armed with this information, we can make sure AI drives opportunity instead of leaving workers behind.”

The proposed legislation comes as politicians, labor advocates and some executives have sounded the alarm in recent years about the potential for widespread job loss due to AI.

In May, Anthropic CEO Dario Amodei said that the AI tools that his company and others are building could eliminate half of all entry-level white-collar jobs and cause unemployment to spike up to 20% in the next one to five years. Anthropic makes the chatbot Claude.

Layoffs have been announced recently at companies across the tech, retail, auto and shipping industries, with executives citing myriad reasons, from AI and tariffs to shifting business priorities and broader cost-cutting efforts. Job cuts announced at Amazon, UPS and Target last month totaled more than 60,000 roles.

Some experts have questioned whether AI is fully to blame for the layoffs, noting that companies could be using the technology as cover for concerns about the economy, business missteps or cost cutting initiatives.

WATCH: Is AI behind recent job cuts? Here’s what to know