Big Tech's AI Spending Spree

Alphabet, Meta, and Microsoft are investing heavily in AI, with capital expenditures reaching unprecedented levels. These companies are vying for dominance in the AI landscape, driving increased spending on data centres, servers, and AI-ready chips. Microsoft's AI infrastructure spending reached nearly $35 billion in the last quarter. Alphabet's revenue exceeded $100 billion for the first time. Meta anticipates 'notably larger' investments next year.

Despite the massive investments, there are concerns about whether these companies can effectively translate capital expenditure into income. Wall Street's reaction has been mixed, with some analysts warning of a potential AI market bubble. The pressure is mounting for these tech giants to demonstrate returns on their AI investments.

The surge in AI spending has varying effects on profitability. Microsoft's cloud unit's growth rate has been a 'serious letdown'. Meta had to pay $15 billion in a one-time payment, which resulted in a miss of 84% in earnings. Alphabet's record infrastructure spending plans are likely to give investors pause.