Tech giants spend $80B on AI as Wall Street divides over payoff timeline

Three of the world’s biggest technology companies just spent close to 80 billion dollars on artificial intelligence systems in the past three months, but Wall Street had very different opinions about their plans to keep spending even more.

Alphabet saw its stock price jump nearly 7% after trading hours Wednesday when the company behind Google announced it would increase its spending plans for 2025 by 8 billion dollars to reach 93 billion dollars. The company also reported it brought in 100 billion dollars in quarterly revenue for the first time ever.

Meta painted a different picture. The social media giant’s stock dropped almost 9%, which could erase around 160 billion dollars from what the company is worth when markets opened Thursday. Mark Zuckerberg’s firm said its AI spending might go beyond 100 billion dollars next year.

Dec Mullarkey, who helps manage 300 billion dollars at SLC Management, said the different reactions show how closely investors are watching to see when AI investments will actually make money.

“Investors are worried that the rush to grab market leadership may cause an overshoot,” Mullarkey explained as reported by FT. “No one needs reminding that history is full of episodes of technology exuberance that eventually left the early investors battered.”

Microsoft faces skepticism despite strong results

Microsoft also saw its shares fall 4% this week, even though the company beat profit predictions and its Azure cloud business saw revenue jump 39%. The company just became the third ever to be valued at more than 4 trillion dollars after settling its partnership arrangement with OpenAI.

Microsoft said it spent 35 billion dollars in the quarter, a 74% jump from last year and 5 billion dollars more than experts expected. Company leaders said spending could reach nearly 140 billion dollars next year.

Chief executive Satya Nadella told financial analysts that Microsoft is building cloud systems at “planet scale” and wants to double the size of its data center operations over the next two years.

Google and Microsoft had an easier time convincing investors that their massive spending on computer chips, data centers and electricity would pay off, partly because both companies sell cloud computing services to other businesses.

Sundar Pichai, Google’s chief executive, said the Gemini App now has 650 million people using it each month, up from 450 million in July. That number is getting closer to ChatGPT’s 800 million users.

Pichai also pointed out that the company’s cloud division grew because of “enterprise AI products, which are generating billions in quarterly revenues.” Google has 155 billion dollars worth of computing service orders waiting to be filled.

Search advertising, Google’s main moneymaker, grew 15%. This helped calm fears that ChatGPT is stealing users and that AI might hurt traditional search business.

Angelo Zino, who analyzes companies for CFRA Research, said the results show Google is successfully adding AI to its advertising systems. “Google’s ability to maintain margins while scaling AI infrastructure demonstrates effective use of spending,” Zino noted.

Meta defends spending on superintelligence quest

As Cryptopolitan reported, Zuckerberg had a harder time defending Meta’s enormous spending, which goes toward infrastructure the company uses itself rather than selling to others. Meta is racing to be the first to create artificial superintelligence.

He argued it made sense “to aggressively frontload building capacity.” Zuckerberg said any extra data center space could be used for Meta’s main advertising business, which he described as “compute starved.”

Meta’s quarterly revenue rose 26% to 51.2 billion dollars, but investors were still unhappy. The company said its spending could hit 72 billion dollars by the end of this year and that increases would be “notably larger” in 2026, suggesting a number well above an earlier 105 billion dollar estimate.

Zuckerberg has been attracting top engineers to his special “TBD” lab by offering compensation packages worth hundreds of millions of dollars. Meta warned these salaries would significantly increase costs when full-year numbers come out.

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