By:
Kyle Murray, Investment Strategist
Dane Smith, Head of North American Investment Strategy & Research
AI investment fuels a $1.1 trillion capex surge in the S&P 500, with IT returns soaring post-tariff. Meanwhile, AI transforms marketing by making high-quality ad creation affordable and narrowing the gap between big brands and small businesses.
The surge in S&P 500 capex spending in 2025 has surpassed even the highest expectations for the year, with estimates putting total AI-focused US Capex at ~$400 billion, up from $320 billion in February.
This extraordinary hype and investment have drawn critics in droves. Many point to AI’s “circular economy” dynamic, where top companies trade billions of dollars back and forth, resulting in no real gain. Others argue that the technology will not be as impactful as predicted.
So, where will AI’s impact be felt? Will it manifest in new revenue streams or improved margins? Additionally, which sectors will benefit from this revolutionary technology—and when?
The attention economy
One area already undergoing significant transformation is the attention economy. Each year, over $300 billion is spent on online advertising, while households contribute another $57 billion toward digital entertainment via streaming services. The attention economy centers on the idea that while the supply of information has surged, the demand for that information has remained relatively static. In fact, consumer attention has become increasingly fragmented, with preferences shifting toward short, easily digestible formats. In this landscape, attention—not information—is the true currency. Companies now compete not just to create content, but to capture and retain consumer attention, which ultimately determines what gets consumed and how it shapes behavior.
It’s no surprise, then, that brand recognition is critical. Platforms that capture the world’s attention can recommend tailored content—often preemptively—outside of a consumer’s conscious awareness. Additionally, AI can be used to optimize both the timing and the amount spent, helping to maximize return on investment in advertising dollars. Rough estimates suggest that high-end users consume as many as 5,000 to 7,000 advertisements per year. The steady revenue stream from advertisers enables larger players to remain formidable competitors, backed by substantial capital resources.
However, marketing R&D budgets are poised for a massive deflationary cycle, as AI video creation continues to exceed expectations. For example, ChatGPT’s latest “Sora” development has crushed forecasts. Now, even small businesses can produce high-quality, complex video stories that would have been impossible prior to 2025 due to high costs and extensive time commitments. Storyboards can come to life with a simple prompt, and some—such as the Coca-Cola AI-Generated Christmas Ad—are already employing the technology for final cuts.
In short, the cost of producing ad campaigns is falling dramatically, and the gap between what a resource-rich conglomerate can create versus what a small company can achieve is narrowing. Nevertheless, the CPM (Cost per 1,000 ad views) is expected to rise, as the number of companies seeking to advertise grows faster than the available digital attention.
Originally posted on October 13, 2025 on State Street Investment Management blog
PHOTO CREDIT: https://www.shutterstock.com/g/Best4best
VIA SHUTTERSTOCK
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