Big tech including Microsoft Corp and Meta Platforms Inc are stepping up spending to build out artificial intelligence (AI) data centres in a rush to meet vast demand.
Microsoft and Meta said on Wednesday that their capital expenses were growing due to their AI investments. Alphabet Inc, too, reported on Tuesday that these expenditures would remain elevated.
Amazon.com Inc, which is set to report results on Thursday, is likely to echo these forecasts.
The extensive capital spending could threaten fat margins at these companies, and pressure on this metric is likely to spook investors.
Microsoft’s capital spending for a single quarter now is more than its annual expenditure used to be until fiscal 2020, according to Visible Alpha. For Meta, a quarter’s spending is in line with what they spent in a year until 2017.
Microsoft said capital spending rose 5.3% to US$20 billion in its first fiscal quarter and predicted increased spending on AI in the second.
Advanced Micro Devices Inc, which reported results earlier this week, said demand for AI chips was rising much faster than supply, limiting its ability to tap the order surge. It warned that the supply of AI chips would be tight next year.
Despite the concerns, Meta and Microsoft said it was still very early in the AI cycle and emphasised the long-term potential of AI.
The investments are reminiscent of when Big Tech was developing cloud businesses and waiting for customers to embrace the technology.
Reuters
