Big Tech pouring money into AI but some investors worried

As throat-cut competition heating up to get ahead of their rivals, Microsoft and Meta are spending big in developing AI technologies, some investors are asking if that much spending is worth it.

Microsoft delivered solid quarterly results on Oct. 30, beating analyst expectations with revenue jumping 16 percent to $65.6 billion, but questions were raised about the company's big spending on the AI boom.

The company has been at the forefront of the generative AI revolution, largely thanks to its partnership with OpenAI, the creator of ChatGPT.

Building and operating AI systems is costly.

Microsoft reported spending $20 billion over the quarter, mostly for its cloud computing and AI needs. That includes building energy-hungry computing centers and supplying them with specialized chips to train and run AI models.

The tech giant warned that its gross margin outlook for its crucial cloud division, or how much money it expects to make, was going to be lower just as its investment in AI infrastructure was set to grow.

The news sent Microsoft's share price down by nearly four percent in after-hours trading.

"Microsoft's latest earnings came in a bit above expectations, but the results may leave some investors wanting more clarity," said Emarketer senior director Jeremy Goldman.

"The true wildcard this quarter has been Microsoft's AI investments. It's pouring cash into building out infrastructure, with major capex implications. Yet, the revenue returns from AI remain more of a promise than a present reality," he added.

Facebook owner Meta also saw net income and revenues top expectations as the company said it would expand investments into artificial intelligence, drawing nervousness from investors.

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