(CLO) The four major technology corporations (Big Tech) including Microsoft, Meta, Amazon and Alphabet continue to increase spending on artificial intelligence (AI) with total investment forecast to exceed $200 billion 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-over-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 hit $209 billion this year, with 80% of that going to data centers.
Several companies, including Meta and Amazon, have said 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 like Microsoft, Meta, and Nvidia lost more than $400 billion in market value.
Microsoft and Google reported growth in AI-driven cloud computing, but Microsoft warned that supply constraints 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 to 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 $10 billion in AI revenue, the fastest-growing revenue in the company’s history. But many other companies have yet to provide concrete figures on the financial benefits of AI, leaving investors concerned 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/big-tech-project-only-200-ty-do-for-who-in-2024-post319844.html
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