Meta Slides As Investors Question Massive AI Spending By Big Tech
SociapaHQ
Big Tech’s race to dominate artificial intelligence has sent shockwaves through investors, with Meta taking the hardest hit as concerns grow over rising costs and uncertain returns.
Meta, the parent company of Facebook and Instagram, saw its shares fall sharply after it revealed plans to spend far more on AI than previously expected. The company said its capital spending could rise to as much as $145bn, up from a prior estimate of $135bn. After trading hours, Meta’s shares dropped around 7%, reflecting investor worries about how quickly these huge investments will pay off.
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Meta AI Spending And Uncertainty:
According to a report by BBC, executives at Meta admitted that the company had underestimated its computing needs in earlier years. Chief financial officer Susan Li said the firm now has no choice but to increase spending to meet demand.
However, Meta chief executive Mark Zuckerberg said there is no exact roadmap for how AI products will scale. He added that the company is building what he called a leading AI research lab, and suggested that future job cuts could be possible as AI changes how work is done inside the company.
At the same time, other major US tech firms also reported earnings, showing a mixed picture of the AI boom. Alphabet, the parent company of Google, stood out as a strong performer. Its profits rose by 30%, helped by a 63% jump in its cloud business, which it linked to growing use of AI by customers. Its shares rose in after-hours trading. The company also said it plans to significantly increase AI spending next year, following this year’s already massive investment levels.
Big Tech AI Spending Surge:
Microsoft also reported strong results, with revenue rising 16% to $83bn and profits up 23% to $38bn. However, its spending on AI has reduced free cash flow, which fell to $15.8bn, down nearly $6bn compared to last year. Even so, Microsoft said its AI business is growing fast, with an annual run rate of $37bn.
Amazon also reported earnings that matched expectations, but it warned that profits next quarter may be lower than previously thought. Its shares still rose slightly after hours.
Altogether, the four major US tech firms are expected to spend more than $650bn this year on artificial intelligence. While companies say these investments will secure future growth, analysts say investors are becoming more cautious about whether the high spending will deliver real profits soon.
