Tech
Q2 capex for Meta, Alphabet, Amazon, and Microsoft
Sherwood News

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.

Rani Molla

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.

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Rani Molla

Alphabet announces $80 billion equity raise to fund AI infrastructure, including a $10 billion bet from Berkshire Hathaway

To fund its rapidly expanding AI infrastructure push, Alphabet just announced a whopping $80 billion equity capital raise.

While concerns over share dilution sent the stock down slightly after-hours, the deal secured a major anchor partner: Berkshire Hathaway, which is backing the offering with a $10 billion investment. (Berkshire was run by Warren Buffett until he stepped down as CEO at the beginning of this year, handing the reins to Greg Abel.)

Alphabet plans to spend up to $190 billion on capex this year.

Alphabet Announces Proposed $80 Billion Equity Capital Raise to Expand AI Infrastructure and Compute

Alphabet Announces Proposed $80 Billion Equity Capital Raise to Expand AI Infrastructure and Compute
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Rani Molla

Despite a massive surge in corporate AI spending, the technology is broadly failing to deliver the massive cost reductions executives had anticipated, according to a new global survey from Bain & Co. shared with Bloomberg. The largest share of major companies measuring their AI returns — 40% — realized cost savings of 10% or less, with poor access to internal data cited as the primary roadblock. Most had expected higher returns. More concerningly, Bain warned that many companies are using their original, overly optimistic projections — rather than their actual savings — to justify funding their next wave of expensive AI investments, creating a “circular bet with a structural leak.”

Rani Molla
7h
Meta thinks it can save its hardware division with AI subscriptions. There are reasons to be skeptical.

An $8 AI subscription won’t plug a $19 billion hardware hole.

A visitor is seen trying a Ray-Ban Meta glasses at a Meta
tech
Jon Keegan

Anthropic confidentially files for IPO

Anthropic has filed confidentially with the Securities and Exchange Commission for its initial public offering. The IPO is expected to be one of the largest in US history, and will likely be joined by OpenAI, which is also expected to go public before the end of the year.

The company filed a draft S-1 form with the SEC, which does not indicate the price of the offering. The official public S-1, which will come later, will give potential shareholders a first look at the finances of Anthropic, which just last week announced that it raised $65 billion, reaching a valuation of $965 billion. This puts the company well ahead of archrival OpenAI, which is currently valued at $850 billion.

Anthropic confidentially submits draft S-1 to the SEC

Anthropic confidentially submits draft S-1 to the SEC
tech
Rani Molla

Prosus may thwart Uber’s bid for Delivery Hero

Uber’s aggressive pursuit of Delivery Hero could hit a major roadblock. After the European food delivery giant rejected Uber’s initial $11.6 billion buyout offer, the American company pivoted, scooping up a 37% stake in the open market.

Now, Prosus, formerly Delivery Hero’s largest shareholder, is plotting a counteroffensive.

Thanks to an EU regulatory waiver Monday that temporarily pauses its mandatory stock sell-down, the Amsterdam-based investment firm is reportedly looking to either increase its stake or rally other shareholders against Uber. The goal: block the takeover entirely or force a significantly higher premium.

Prosus has warned about the loss of European tech relevance if a US giant swallows the company. Meanwhile, investors are loving the drama: the takeover tug-of-war, which also includes DoorDash, has sent Delivery Hero stock soaring over 75% in the past month.

Uber faces Prosus challenge in Delivery Hero pursuit

Uber faces Prosus challenge in Delivery Hero pursuit

Thanks to an EU regulatory waiver Monday that temporarily pauses its mandatory stock sell-down, the Amsterdam-based investment firm is reportedly looking to either increase its stake or rally other shareholders against Uber. The goal: block the takeover entirely or force a significantly higher premium.

Prosus has warned about the loss of European tech relevance if a US giant swallows the company. Meanwhile, investors are loving the drama: the takeover tug-of-war, which also includes DoorDash, has sent Delivery Hero stock soaring over 75% in the past month.

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