Following Meta Platforms’ release that signaled increased investment and a prolonged road to profitability, investors appear to be growing frustrated with Big Tech’s large artificial intelligence bets this week.
Following Meta Platforms’ (META.O) announcement that indicated increased spending and an extended path to profitability, investors seem to be growing impatient with Big Tech’s massive artificial intelligence bets this week.
The concession made by Meta in its late-Wednesday quarterly report threw doubt on Alphabet (GOOGL.O) and Microsoft (MSFT.O), both of which will release their quarterly earnings on Thursday.
After forecasting more AI spending for the upcoming year, Meta’s stock slumped 15% in extended trading. In response, Microsoft lost 2%, Alphabet fell 3%, and Nvidia (NVDA.O), which opened a new tab, dropped 1.4%.
The leading tech companies on Wall Street are engaged in a fierce competition to develop generative AI, which is thought to be the next big thing in technology that can produce text, films, and images at the touch of a button.
Analysts bombarded CEO Mark Zuckerberg with inquiries over the company’s AI investment pacing during Meta’s quarterly conference call. Meta was spending more because it saw an even greater opportunity from AI, one analyst questioned.
Zuckerberg retorted, “I think we’ve gotten more ambitious and optimistic on AI,” citing Meta’s recent releases of new AI models. “So all of that basically encourages me to make sure that we’re investing to stay at the leading edge of this.”
Both Microsoft and Alphabet predicted growing expenditures associated with artificial intelligence when they released their fourth-quarter results earlier this year. The response from investors on Wednesday revealed growing apprehensions.
Ahead of the results on Thursday, analysts from New Street Research expressed concern about the possibility of considerably higher capital expenditures in a research note they released on Alphabet on Monday.
The research group stated that it has revised its forecast of Alphabet’s full-year capital expenditures from $42.7 billion to $45.9 billion.
In an effort to catch up in the battle for generative AI, Google unveiled Gemini, a model that can comprehend and produce a variety of information formats, including text, audio, and video.
The energy-intensive nature of generative AI content creation was mentioned by Zuckerberg as the cause of Meta’s increased costs.
According to analysts from Jefferies in a note dated March 31, Microsoft has positioned itself as a winner in AI thanks to its collaboration with OpenAI, which started the generative AI frenzy with ChatGPT last year.
Microsoft plans to increase its data center investments and has included chatbots in its Office product line.
According to Jefferies, investors are now primarily concerned with generating income across the board. This includes examining pricing strategies and whether or not clients can create use cases for generative AI that outweigh its cost.
The analysts stated, “Last year was spent dreaming of Gen AI’s potential.” “This year, concrete steps toward progress will be the focus.”
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