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(Bloomberg) -- Three months ago, Wall Street punished the world’s largest technology firms for spending enormous amounts to develop artificial intelligence, only to deliver results that failed to justify the costs.
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Silicon Valley’s response this quarter? Plans to invest even more.
The capital expenditures of the four largest internet and software companies — Amazon.com Inc., Microsoft Corp., Meta Platforms Inc. and Alphabet Inc. — are set to total well over $200 billion this year, a record sum for the profligate collective. Executives from each company warned investors this week that their splurge will continue next year, or even ramp up.
The spree underscores the extreme costs and resources consumed from the worldwide boom in AI ignited by the arrival of ChatGPT. Tech giants are racing to secure the scarce high-end chips and build the sprawling data centers the technology demands. To do so, the companies have cut deals with energy providers to power these facilities, even reviving a notorious nuclear plant.
They’re each trying to convince Wall Street that these huge investments will make their future businesses more profitable than the current ones selling digital ads, goods and software.
On an investor call on Thursday, Andy Jassy, Amazon’s chief executive, called AI a “really unusually large, maybe once-in-a-lifetime type of opportunity,” evidenced by his company’s projection for a record $75 billion in spending for 2024. “I think our customers, the business, and our shareholders will feel good about this long term — that we’re aggressively pursuing it.” Analysts at MoffettNathanson called Amazon’s spending “truly staggering.”
A day earlier, Meta CEO Mark Zuckerberg pledged to ramp up investing in AI language models and other futuristic projects he now frames as core to his company’s future. Meta’s capital spending may climb as high as $40 billion this year. Meanwhile, Alphabet’s capex budget came in higher than Wall Street expectations, and its Chief Financial Officer Anat Ashkenazi projected “substantial” increases in 2025.
Apple Inc. has also vowed to invest in AI, introducing a suite of services, like a more capable Siri, called Apple Intelligence. But its relatively weak financial results this quarter weren’t helped by its new AI products, which mostly hadn’t arrived.
Financial results for the tech giants this week were a mixed bag. Shares of Amazon and Google parent Alphabet soared after the companies beat earnings expectations, largely on the strength of growth in their cloud-computing units. But Meta and Microsoft fell after the former’s spending plans caused jitters, and the latter’s outlook for cloud revenue growth disappointed.