Key Takeaways
- Microsoft and Meta are increasing their expenditures on AI infrastructure.
- As investors questioned the viability of their bold investments, the stocks of both companies declined.
- Alphabet has also revealed increased capital expenditures for AI infrastructure.
Due in large part to rising investments in AI infrastructure, Meta and Microsoft announced significant increases in capital expenditures on Wednesday.
However, Wall Street has raised an eyebrow collectively as a result of this frantic spending binge, with investors questioning how quickly Big Tech can turn all of this innovation into actual profit.
Microsoft reported that its capital expenditures for the most recent quarter totaled $20 billion, which is twice as much as it spent the previous year. The tech giant is placing a lot of money on cloud-based AI with this investment, particularly in its Azure division, which underpins a large portion of its AI endeavors.
Despite a 17% increase in total sales over the previous year, Microsoft’s shares fell more than 3% in after-hours trading as Wall Street considered the company’s profitability in comparison to its ambitious spending plan.
The speed at which the Facebook parent company is expanding its AI capabilities is also evident in the fact that Meta’s AI spending has increased to a level that was previously typical of its annual budget. Investor fears about the financial burden from Meta’s quick development into AI caused its shares to fall by about 3%, despite the company’s positive Q3 results.
Similar capital expenditures for AI and cloud infrastructure were mentioned by Alphabet, the parent company of Google, in its most recent earnings report. Amazon is expected to follow suit when it releases its earnings in the near future.
Amid Big Tech AI Spending, Investor Doubts Are Growing
Tech companies are willing to take additional risks, even though some investors are starting to have their worries about whether this significant investment in AI can spark a new revenue era or reduce profit margins.
After Microsoft announced comparable spending in May, Google just announced a $1 billion investment in Thailand to expand its cloud infrastructure and construct a new AI data center. To keep up with the competition, Invidia is getting ready to invest heavily in Thailand’s AI sector. Plans to construct what they say would be Asia’s largest AI data center have been started by Japan’s KDDI and its partners.
Whether these audacious AI wagers will succeed or cause more market volatility will probably become clear in the upcoming months.
