Big Tech’s Massive Spending on Artificial Intelligence to Continue Unchecked in 2025
Spending Surges 63% to Historic Levels
The four leading US tech companies, Amazon, Microsoft, Alphabet, and Meta, have reported combined capital expenditure of $246bn in 2024, up from $151bn in 2023. They forecast spending could exceed $320bn this year as they compete to build data centers and fill them with clusters of specialized chips to remain at the forefront of AI large language model research.
Executives Vow to Accelerate AI Investments
Despite concerns about the vast sums being bet on the nascent technology, executives are vowing to accelerate their AI investments. Amazon CEO Andy Jassy has forecasted more than $100bn in capital expenditure this year, up from $77bn in 2024. Microsoft’s Satya Nadella has reiterated his belief in the folly of slowing down and failing to capitalize on its early backing of start-up OpenAI.
Market Concerns and Shareholder Worries
The scale of their spending ambitions has surprised the market and exacerbated a sell-off caused by the release of an innovative and cheap AI model from Chinese start-up DeepSeek in late January. Microsoft and Google parent Alphabet each saw $200bn wiped from their market value after reporting weaker than expected growth in their cloud computing divisions alongside steep increases in capital spending.
Concerns About Return on Investment
Some investors worry that doubling down on spending without a commensurate increase in revenues could eat into capital that would otherwise be returned in the shape of buybacks and dividends, while starving non-AI business lines. Google has been opaque about usage and revenue from its Gemini chatbot, while companies have been wary of adopting Microsoft’s glitchy and costly Copilot "agents" to improve workforce productivity.
Conclusion
Big Tech’s massive spending on artificial intelligence is set to continue unchecked in 2025, with executives vowing to accelerate their AI investments. While some investors worry about the return on investment, the companies are ploughing ahead, driven by their desire to remain at the forefront of AI research and development.
FAQs
Q: What is the total capital expenditure of the four leading US tech companies in 2024?
A: The four leading US tech companies, Amazon, Microsoft, Alphabet, and Meta, have reported combined capital expenditure of $246bn in 2024.
Q: What is the forecasted capital expenditure for 2025?
A: The companies forecast spending could exceed $320bn this year as they compete to build data centers and fill them with clusters of specialized chips to remain at the forefront of AI large language model research.
Q: What is the concern about the return on investment?
A: Some investors worry that doubling down on spending without a commensurate increase in revenues could eat into capital that would otherwise be returned in the shape of buybacks and dividends, while starving non-AI business lines.
