Big Tech's investment in AI is growing too large to fail
AI is the subject of a spending frenzy, and during this earnings season, additional information has been revealed about the rate of that expenditure.
Meta increased its estimate for capital expenditures to between $37 and $40 billion. Last quarter, Microsoft spent $19 billion, which included server farm leases. Amazon has already spent $30 billion this year, and by the end of 2024, it plans to increase that amount even further. Apple may be zigging, but it is obvious that it has a new focus on AI.
It has been said that generative AI will be the next web and smartphone, a game-changing technological advancement. These businesses have increased their spending in an arms race to develop generative AI as a result.
But does the spending have an impact on that belief as well? Do these corporations and their clients have such high expectations that they would attempt to force generative AI into unnecessary goods and processes even if it doesn't live up to the hype?
There are many examples of "transformational" technology throughout history that fell short of expectations.
Alexa from Amazon is one example of a digital assistant. "We worried we've hired 10,000 people and we've built a smart timer," a former senior employee was recently reported by the Wall Street Journal. Before giving up on the project earlier this year, Apple was reportedly investing $1 billion a year to create a car that would revolutionize the industry.
Naturally, a moonshot project like the vehicle was merely Apple's side project, akin to a lottery ticket for the organization. For companies like Alphabet, Meta, Microsoft, and even Tesla, who are emphasizing AI in their investor pitches, that appears to be more the case. They are driven to see it through.If the investors' eager response to Microsoft's earnings is any indicator, the subsequent phase of digestion has probably already started. In contrast, Doug Anmuth of JPMorgan stated that Meta "continues to earn the right to spend big on GenAI" in response to its financial results.
As he noted, "Open source Llama 3.1 should support a faster pace of innovation, better social/advertiser experiences, & cost benefits. Management continues to expect Meta AI to become the most used AI assistant by the end of 2024."
