Tech giants set to invest $200B in AI this year
The world's top tech giants, including Amazon, Microsoft, Meta, and Alphabet (Google's parent company), are expected to spend over $200 billion on artificial intelligence (AI) development this year. Three months ago, Wall Street expressed skepticism toward the massive spending by leading tech companies on AI development, questioning the return on investment for projects that seemed to fall short of expectations. The tech giants have responded with even bigger plans.
Tech giants' spending spree continues amid AI boom
The latest investment surge has been fueled by the global AI boom, which was sparked by the launch of ChatGPT. In order to cater to the technological demands of this boom, tech giants are racing to acquire high-end chips and build massive data centers. They have even struck deals with energy suppliers to power these facilities, even reviving a dormant nuclear plant.
CEOs express confidence in AI investments
The CEOs of these tech giants are confident that their massive investments in AI will result in more profitable businesses in the future. Amazon's CEO Andy Jassy called AI an "unusually large, maybe once-in-a-lifetime type of opportunity," during an investor call on Thursday. He also forecasted a record $75 billion spending for his company in 2024. Analysts at MoffettNathanson have called Amazon's spending "truly staggering."
Meta and Alphabet to increase AI investments
Meta's CEO Mark Zuckerberg has promised to boost investments in AI language models and other futuristic projects, which he now sees as core to his company's future. Meta is likely to invest up to $40 billion this year. It is already training its next-gen AI model on industry's largest GPU cluster. Alphabet's CFO Anat Ashkenazi also announced plans for "substantial" increases in 2025 after the company's capital expenditure budget exceeded Wall Street expectations this year.
Microsoft and Meta's financial performance amid AI investments
Despite robust revenue growth and operating profit improvements for the quarter, both Microsoft and Meta witnessed their stocks slip about 3% in after-hours trading after their reports. This year, Microsoft has already spent $53 billion, which is about 28% of its revenue for the period. Meanwhile, Meta intends to spend $38 billion-$40 billion on capital expenditures this year, roughly 24% of Wall Street's projected revenue for the company.
