Tech giants are heavily investing in AI, with signs of payoff becoming evident, albeit at a steep price. Microsoft, Amazon, Google, and Meta, four of the biggest AI players, have reported AI sales growth. However, they’ve also pointed to increased capital expenditure to meet AI demand.
Microsoft spent $14 billion on capital expenditures tied to its AI buildout in its fiscal third quarter, doubling from $7.8 billion in the same period last year. The company’s 2024 capital expenditures have already surpassed its total spending in 2023, with another quarter still left in its fiscal year.
Google’s parent company, Alphabet, spent $12 billion in the last quarter and plans to continue at this pace for the rest of the year. Meta has increased its spending for the full year from $30 billion-$37 billion to $35 billion-$40 billion. Amazon, on the other hand, plans to exceed last year’s $48.4 billion in capital expenditures.
While these are significant amounts of cash, early signs indicate that AI is driving revenue growth. However, it will take time before it significantly impacts companies’ bottom lines. Experts predict a 12- to 18-month investment period before substantial payoffs are seen.
Generative AI, a relatively new technology, is being gradually adopted by corporations. Companies are starting with a smaller number of signups to understand how they can best use AI applications before signing up the rest of their employees.
During its earnings call last week, Microsoft reported that AI accounted for 7 percentage points of revenue growth in its Azure and other cloud services business. This was up from 6 percentage points in the prior quarter and 3 percentage points in the quarter before that.
Read more at: finance.yahoo.com