AI is driving tech giants’ spending and profits, but the return on investment is still in question

Large technology companies do not hide their intention to continue to actively invest in the development and operation of AI systems. As the IEEE Communication Society (ComSoc) blog shows, they are ready to do this even though investors are already concerned that the gigantic investment may not pay off soon. However, there are still many signs that the AI ​​technology boom will continue.

Last quarter, capital expenditures by Apple, Amazon, Meta✴, Microsoft and Alphabet totaled $59 billion, up 63% year-over-year and 161% more than four years ago. A significant part of the funds was spent on building data centers and equipping them with new systems for AI. Among the largest companies, only Apple has not spent much, and that is because the company does not build its own advanced AI systems and, unlike others, is not a traditional cloud provider.

Image source: New York Times

At the beginning of the year, Meta✴ said it would spend more than $30 billion in 2024 on new technology infrastructure. In April, it raised its spending forecast to $35 billion, and last Wednesday – to $37 billion, and this is the minimum. According to the head of the company, Mark Zuckerberg, the company will spend more next year, he said that it would be better to build “too fast than too late” – the IT giant will not allow competitors to overtake it in the AI ​​race. Zuckerberg believes that AI can be used to improve all of the company’s products in literally every aspect.

The new stage of development of generative AI systems is extremely expensive, but the financial return from them is not yet very impressive. In recent months, some analysts and investment firms, including Goldman Sachs and Sequoia Capital, have questioned whether AI spending will ever pay off. However, some believe that it is not yet clear whether AI will have at least approximately the same impact on society as the advent of the Internet and mobile phones.

There is no single view on the problem. If some say that AI will only take away jobs with the help of expensive technologies (which did not always happen during other scientific and technological revolutions), then others are confident that the number of jobs will only increase and new employees are needed now – only the nature of work will change. Amazon in particular is optimistic about the future, buying new land, chips and equipment, as well as building new data centers and expecting revenue growth over the next decade.

Image source: AXIOS

Profits and revenues of large companies will continue to grow, but will high costs provide a good return on investment in the long term? For now, the indirect indicator is reporting for the second quarter of 2024:

• Alphabet – net profit $24 billion, revenue $85 billion;
• Microsoft – $22 billion and $65 billion;
• Meta✴ – $13.5 billion and $39 billion;
• Apple – $21 billion and $86 billion;
• Amazon – $13.5 billion and $148 billion.