'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 significantly increase their spending on artificial intelligence (AI), with total investments projected to exceed $200 billion this year and further increase in 2025.

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

Illustration photo: FT

Capital spending by these four corporations has increased by more than 62% year-on-year, reaching approximately $60 billion in the last quarter alone, primarily on data center infrastructure and AI processing chips. Analysts from Citi predict total capital spending will reach $209 billion this year, with 80% of that going towards data centers.

Several corporations, such as Meta and Amazon, have announced plans to continue increasing spending next year. This has caused concern among investors, as the Nasdaq Composite index fell 2.8% on Thursday, and major companies like Microsoft, Meta, and Nvidia lost more than $400 billion in market capitalization.

Microsoft and Google reported growth in the cloud computing sector thanks to AI; however, Microsoft also warned of supply constraints that could slow growth in the coming quarter. Similarly, Amazon Web Services (AWS) failed to meet growth expectations, despite relatively stable profit margins.

Meta and Alphabet have announced that AI helps increase user engagement and improve advertising, but some analysts argue that the actual impact remains unclear. Jim Tierney from AllianceBernstein suggests that this massive spending is eroding companies' profits and will become more apparent in 2025.

Microsoft reported $10 billion in AI revenue, the fastest growth in the company's history. However, many other companies have yet to provide concrete figures on the financial benefits of AI, leaving investors concerned about the enormous costs without clear benefits.

Faced with cost challenges, Amazon and Microsoft executives emphasized that scaling up data centers for AI reflects real customer demand. They also compared AI spending to the early stages of cloud computing, where infrastructure investment 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