Big tech’s huge AI spending isn’t slowing down. The revenue? Uhhhhh...
Today is a good time to remind you that almost every major tech company is dropping large amounts of cash on AI tech that isn't making them anything back.
Last quarter was a huge quarter for capital expenditure at big tech companies.
This one was somehow even bigger.
Amazon, Microsoft, Alphabet and Meta spent a combined $52.8 billion on capex in the second quarter — or nearly 60% more than the same quarter last year, according to standardized data from FactSet. The main expense? AI, as big tech hopes to invest big on the next big thing.
And according to their forward-looking statements, that spending is expected to go up even more.
Amazon CFO Brian Olsavsky
Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads.
Meta CFO Susan Li
We anticipate our full year 2024 capital expenditures will be in the range of $37 billion to $40 billion updated from our prior range of $35 billion to $40 billion. While we continue to refine our plans for next year, we currently expect significant CapEx growth in 2025 as we invest to support our AI research and our product development efforts.
Microsoft CFO Amy Hood
To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY 2025 capital expenditures expected to be higher than FY 2024.
Alphabet CFO Ruth Porat
Our reported CapEx in the second quarter was $13 billion. Once again, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion.
What’s changed this quarter is that investors are more interested in when all this AI spending might actually yield returns.
When asked about AI capex ROI, Alphabet CEO Sundar Pichai said:
“The one way I think about it is when you go through a curve like this, the risk of underinvesting is dramatically greater than the risk of overinvesting for us.”
Microsoft CEO Satya Nadella said the company is pegging its AI spending to demand signals.
It's more important to manage, to capture the opportunity with the right product portfolio that's driving value.
Meta’s Porat:
We don't expect our GenAI products to be a meaningful driver of revenue in 2024. But we do expect that they're going to open up new revenue opportunities over time that will enable us to generate a solid return off of our investment
In other words: They’re spending now in hopes of bigger returns down the line.
