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Tech giants bet big on AI; will spending pay off?

This year, the combined capital expenditures of the big four—Amazon, Microsoft, Meta, and Alphabet—are set to skyrocket beyond a staggering $200 billion

By Dhanam News Desk
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Big techs investing huge money in AI (Pic: Canva)

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The tech titans are throwing their wallets wide open for artificial intelligence, even after Wall Street sent them a clear message just a few months ago: slow down on the spending. Back then, investors were rattled by the hefty investments that seemed to deliver underwhelming results. But instead of hitting the brakes, Silicon Valley has decided to double down, according to Bloomberg.

In a war for AI power

This year, the combined capital expenditures of the big four—Amazon, Microsoft, Meta, and Alphabet—are set to skyrocket beyond a staggering $200 billion. That’s a record-breaking splurge, all in the name of AI. With the AI boom sparked by ChatGPT, these giants are scrambling to secure precious high-end chips and construct massive data centres. They've even inked deals with energy providers, reviving old nuclear plants to fuel their insatiable appetite for power.

Claims by executives 

Amazon’s CEO, Andy Jassy, boldly proclaimed AI as a "once-in-a-lifetime opportunity," predicting a $75 billion spending for 2024. Meanwhile, Meta’s Mark Zuckerberg has committed to ramping up investments in AI language models, projecting his company’s capital spending to hit around $40 billion. Alphabet also surprised analysts with a higher-than-expected capex budget and promised even more in the coming years.

Investment not equates returns

But it’s not all sunshine and rainbows. While some companies like Amazon and Alphabet bask in the glow of beating earnings expectations, others, like Meta and Microsoft, are feeling the heat. Microsoft's recent quarterly results reflected a lack of capacity to meet surging demand, leading to a dip in stock prices. And let’s not forget Meta, which reported a staggering $4.4 billion operating loss in its Reality Labs division—an alarming sign for investors who are becoming increasingly jittery.

The concern? Such lavish spending on AI comes with significant risks. Investors are anxious about whether these colossal investments will ultimately yield the returns they're hoping for. Many are still waiting to see a payoff from Meta’s ambitious AI bets, particularly as its core ad business shows signs of strain. 

Yet, amid the uncertainty, some analysts remain hopeful. They argue that if history is any guide, patience could pay off for these tech giants. In a world where AI is seen as the next frontier, the stakes are high, and the race is on.