Investors appear to be losing patience with prodigious investments in artificial intelligence (AI) of technology giants this week, after the Meta Platforms signaled deeper spending and a long road to profitability.
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Meta's concession in its quarterly report last Wednesday (24) cast a shadow over the Microsoft e A, which will also release its quarterly results on Thursday (25).
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Meta's shares plunged 15% in after-market trading after it forecast a surge in AI spending next year, while Meta's Microsoft fell 2%, Alphabet fell 3% and Nvidia fell 1,4% in reaction.
Wall Street's big tech firms have been fighting a fierce battle to advance generative artificial intelligence, which can create text, videos and photos from prompts and is seen as the next frontier in technology.
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During Meta's earnings call, analysts peppered CEO Mark Zuckerberg with questions about how the company was conducting its AI investments. One analyst asked whether Meta was spending more because it saw an even bigger opportunity in AI.
“I think we've gotten more ambitious and optimistic about AI,” Zuckerberg responded, pointing to Meta's recent launches of new AI models. “So all of this encourages me to make sure we’re investing to stay on the cutting edge of this.”
Alphabet and Microsoft They said earlier this year when they released fourth-quarter results that they expected rising AI costs. Investor reaction on Wednesday indicated growing concerns.
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In a research note on Alphabet on Monday, analysts at New Street Research said the potential for significantly higher capital spending was a concern ahead of results on Thursday.
The research firm now says it expects Alphabet's annual capital expenditures to be $45,9 billion, up from its previous estimate of $42,7 billion.
A Google has been working to catch up to the generative AI race and launched the Gemini, a model that can understand and create different types of information, including text, audio, and video.
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Creating content with generative AI is energy-intensive, and Zuckerberg cited cost as a reason for Meta's higher spending. Meanwhile, the Microsoft has positioned itself to be a winner in AI due to its partnership with OpenAI, which kicked off the generative AI craze last year with the ChatGPT, Jefferies analysts said in a March 31 note.
A Microsoft has integrated chatbots into its Office product suite and plans to invest more in data centers.
Across the industry as a whole, shareholders are now focused on looking for revenue, including pricing models and whether customers can find use cases that justify the cost of generative AI, Jefferies wrote.
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“The past year has been spent dreaming about the potential of gen AI,” the analysts wrote. “This year will be about moving forward with concrete steps.”
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