Three months back, Wall Street wasn't too thrilled about the hefty investments that the biggest tech companies were pouring into artificial intelligence, mainly because the results fell short of what everyone expected. But it looks like Silicon Valley is doubling down this quarter and is all in on more investments.
The total capital spending from the top four internet and software giants—Amazon, Microsoft, Meta, and Alphabet—is set to surpass $200 billion this year, which is a record high for this lavish group. This week, the execs from these companies warned investors that their spending binge might not just continue into next year but could actually ramp up.
This expenditure highlights the substantial costs and resources associated with the global AI surge triggered by the introduction of ChatGPT. Tech giants are competing to acquire limited high-performance chips and to construct the extensive data centers required by this technology. To facilitate this, they have established agreements with energy suppliers to power these operations, including the revival of a controversial nuclear facility.
Each company is striving to persuade Wall Street that these significant investments will yield greater profitability in the future compared to their current revenue streams from digital advertising, products, and software.
During an investor call on Thursday, Amazon's CEO Andy Jassy described AI as a "remarkably significant, perhaps once-in-a-lifetime opportunity," as reflected in the company's forecast of a record $75 billion in spending for 2024. "I believe our customers, the business, and our shareholders will appreciate this long-term strategy as we pursue it vigorously," he stated. Analysts at MoffettNathanson characterized Amazon's expenditures as "truly staggering."
The day prior, Meta's CEO Mark Zuckerberg committed to increasing investments in AI language models and other innovative initiatives, which he now considers essential to the company's future. Meta's capital expenditures could reach as high as $40 billion this year. Additionally, Alphabet's capital expenditure budget exceeded Wall Street's expectations, with CFO Anat Ashkenazi forecasting "substantial" increases for 2025.