'Big Tech' quartet to spend $200 billion on AI by 2024

(CLO) The four major technology corporations (Big Tech) including Microsoft, Meta, Amazon and Alphabet continue to increase spending on artificial intelligence (AI) with the total investment forecast to exceed 200 billion dollars this year and increase further in 2025.

This raises concerns about profitability and the ability to maintain profit margins in the future.

Illustration: FT

Capital spending by the four companies jumped more than 62% year-on-year to about $60 billion in the last quarter alone, driven largely by data center infrastructure and AI chips. Citi analysts predict total capital spending will reach $209 billion this year, with 80% of that going to data centers.

Several companies, including Meta and Amazon, have announced that they will continue to increase spending next year. This has investors worried as the Nasdaq Composite Index fell 2.8% on Thursday, and large companies such as Microsoft, Meta, and Nvidia lost more than $400 billion in market capitalization.

Microsoft and Google saw growth in cloud computing fueled by AI, but Microsoft warned of supply constraints that could slow growth in the coming quarter. Similarly, Amazon Web Services (AWS) cloud missed the highest expectations for growth, despite its relatively stable profit margins.

Meta and Alphabet have touted AI as helping increase user engagement and improve advertising, but some analysts say the real-world impact remains unclear. Jim Tierney of AllianceBernstein says this massive spending is already squeezing companies' profits and will become more pronounced in 2025.

Microsoft reported AI revenue of $10 billion, the fastest-growing in the company's history. But many other companies have yet to provide concrete figures on the financial benefits of AI, leaving investors worried about the huge costs without clear benefits.

Faced with cost challenges, Amazon and Microsoft executives stressed that the increase in data centers for AI reflects real customer demand. They also compared AI spending to the early stages of cloud computing, when infrastructure investments also increased costs.

Cao Phong (according to FT)

Source: https://www.congluan.vn/bo-tu-big-tech-du-bao-chi-200-ty-do-la-cho-ai-trong-nam-2024-post319844.html