In the race for advanced AI, tech giants will spend more than $200 billion in 2024

Capital expenditures of Amazon, Microsoft, Meta✴ and Alphabet will amount to more than $200 billion by the end of 2024, Bloomberg estimates. Executives at major companies this week warned investors that their spending will remain the same or even rise next year.

Image source: Alex Dudar / unsplash.com

Three months ago, following the results of the second quarter, investors reproached the world’s largest technology companies for spending too much on the development of artificial intelligence. In response, Silicon Valley decided to invest even more in AI. Tech giants are rushing to get hold of scarce chips for high-performance AI systems and build large data centers for them – major deals are being concluded with energy suppliers, and the role of nuclear power is increasing. Companies are trying to convince Wall Street that these investments will help drive profits to levels unattainable from digital advertising, merchandise and software.

Meta✴ CEO Mark Zuckerberg has promised to increase investments in AI language models and other futuristic projects that, in his opinion, will ensure the future of the company – by the end of the year, its capital expenditures could grow to $40 billion. Alphabet’s capital expenditure budget turned out to be higher than expected Wall Street, and in 2025 the company’s CFO Anat Ashkenazi predicted its “significant” growth. Amazon CEO Andy Jassy described AI as “a truly extraordinary, perhaps even unique opportunity” and announced a forecast that the company will spend $75 billion in 2024. Apple also promised to invest in AI, but this technology is affecting its financial results has not affected yet.

Image source: efes/pixabay.com

Amazon and Alphabet beat analysts’ earnings estimates, led by cloud businesses, and their shares soared; Meta✴ confused investors with its spending plan, and Microsoft disappointed them with its cloud revenue growth forecast. Amazon shares rose 6.7%, Alphabet, Microsoft and Meta✴ showed slight gains, and Apple fell 1.1%.

Microsoft showed weak quarterly results not because of low demand, but because it was unable to increase capacity quickly enough, and its CEO Satya Nadella had to make excuses that data centers “are not built overnight.” Investors do not despair: the growth of the cloud segment for the company will be delayed slightly, and investments and its stake in OpenAI promise it long-term success, analysts say. Microsoft spent $14.9 billion in the third quarter, 50% more than in the same period last year and more than it spent on property and equipment in any full year before 2020.

The loss of the Meta✴ Reality Labs division, which specializes in virtual and augmented reality technologies, amounted to $4.4 billion at the end of the quarter; the company has spent heavily on creating Llama models that compete with solutions from Google and OpenAI. Zuckerberg assured investors that investments in AI will help the company develop the advertising business of Facebook✴ and Instagram✴. Investors are wary of any signs of weakness in the company’s advertising business, but they are beginning to come to terms with the idea that patience is rewarded in the case of Meta✴ – its shares have risen 60% since the beginning of the year.