Athira Sethu
Kochi, 2 Nov 2024
Three months ago, Wall Street criticized major tech companies for splurging millions of dollars on artificial intelligence without having enough return in terms of matching their spending. And instead of slowing down, Silicon Valley has reacted to this quarter by spending more.
Predictably, the four largest Internet and software companies Amazon, Microsoft, Meta and Alphabet will spend a record amount of more than over $200 billion this year shattering the old record as executives of the companies kept telling investors that such kind of trend of high spending could continue into next year-or even get worse-say Bloomberg.
This spending boom points towards the enormous investment needed for sustaining the AI boom unchained by ChatGPT. Tech firms compete to secure scarce high-performance chips and erect gigantic data centers that AI technology mandates. They have signed with energy providers to guarantee they will have sufficient power sources, including the restarting of the contentious nuclear plant.
Every company is trying to tell Wall Street that significant investments in future years will ultimately bring them higher profit levels compared to what they could now achieve with the existing digital advertisements, product, and software sales.
According to the CEO of Amazon, Andy Jassy, during an investor call, AI was termed a “once-in-a-lifetime opportunity” as he also made the announcement for record spending in 2024 amounting to $75 billion. He was sure that it would help customers, businesses, and shareholders in the long run. Analysts at Moffett Nathanson termed the spending of Amazon as “truly staggering.”
Similarly, Meta’s CEO Mark Zuckerberg has promised to spend more money on AI language models and other sophisticated products that he now sees as crucial to the future of the company. Meta’s capital expenditure may even rise to $40 billion this year.
Alphabet, too, reported that it will be spending more than analysts have estimated. CFO Anat Ashkenazi said “substantial” increases in 2025, according to Bloomberg.
Overall, the biggest tech companies have not been discouraged by past failures. They are investing more in AI and hoping that such investments will pay off with enormous growth and profitability in the future. This investment is a manifestation of the race among tech companies to exploit AI technology.
