Tech Giants Double Down on AI Investments Despite Efficiency Concerns

As Tech Companies Keep Pouring Money Into AI, Signs May Be Pointing to Disaster

Fourth quarter earnings season is in full swing, and despite budgets larger than some countries' GDPs, big tech companies' financial statements are looking grim. Even after president Donald Trump's announcement of a $500 billion AI infrastructure deal, the so-called "magnificent seven" (M7) stocks -- the Wall Street nickname for Google, Meta, Nvidia, Tesla, Apple, Microsoft, and Amazon -- are slumping. Once thought to be airtight, analysts are now warning that it may be time for investors to sell. Tesla and Google both whiffed at earnings expectations, sending their shares into a tailspin -- Tesla's share price has tumbled 15 percent over the past month, while Google's parent company Alphabet saw its stock valuation drop by 9 percent in a single day. Nvidia, meanwhile -- which was previously printing money as the de facto provider of shovels for the AI gold rush -- saw almost $600 billion evaporate within hours of DeepSeek's announcement that it had developed one of the most efficient AI language models we've seen, suggesting a future far less dependent on its chips than previously anticipated. And though Apple, Amazon, and Meta slightly exceeded quarterly expectations, they didn't return the same kind of explosive growth the market has learned to expect, prompting Goldman Sachs strategists to change its tune on big tech's AI strategy. The disappointment isn't just internal. Compared to the S&P 500 -- of which the behemoths of the M7 make up a third -- the tech giants' stock growth has slowed to a crawl. Whereas the S&P 500 has grown 2.6 percent since January 1 and the NASDAQ Composite has made gains of 3 percent, as Barron's points out, a quick glance at M7's stock performance shows growth of just 1 percent. All together, the M7 aren't looking like the long-term golden goose investors had counted on. While some of this can be traced to the optics of big tech's rightward turn -- Tesla sales, for example, have fallen down a pit while its CEO Elon Musk guts the federal government -- it might more accurately be called a collective groan as rampant AI spending fails yet again to produce any meaningful returns. "There is no question either way that the high capital spending will continue to come under increasing scrutiny until investors can better understand the return on today's massive investments," stock market analyst Adam Parker told Barron's. Over the past two years, companies like Google have taken to ransacking huge swaths of their workforce in order to dump resources into AI research, with a particular emphasis on "scaling." That's the widely parroted belief that simply increasing the number of computing power will lead to better and better AI. The M7 bought into that hook-line-and-sinker, and so did investors, dumping billions of dollars into AI ventures on the assumption that the line would only go up. Now, Barron's reports, the group's spending-to-sales ratio has hit a record high of 14.5 percent, showing that big tech is no closer to delivering on its lofty promises than it was a year ago. Though the tech giants are showing no signs of slowing down on AI spending yet, it's a sign that their leash isn't infinite -- and that Wall Street, not Silicon Valley, has the final word.

Tech Giants Plan Massive $320 Billion AI Spend for 2025 | PYMNTS.com

America's tech giants could reportedly spend more than $320 billion on artificial intelligence (AI) this year. AI investments by the four biggest tech firms -- Amazon, Google, Meta and Microsoft -- jumped 63% last year, and will jump again for 2025, the Financial Times (FT) reported Friday (Feb. 7). However, the report added, investors are concerned that upping spending on AI without seeing a corresponding uptick in revenue will rob companies of capital that could otherwise go to buybacks and dividends, while hamstringing non-AI business lines. "The unbridled enthusiasm across the entire 'Magnificent Seven' has been replaced by pockets of skepticism and created some 'show me' situations," Jim Tierney, head of the concentrated U.S. growth fund at AllianceBernstein, told the FT. "The concerns that I've had since summer are magnified today." Executives at these companies, the report said, are pledging to up their investments in AI, pushing aside worries about the massive amounts they're spending on the technology. The four companies, the FT added, have reported combined capital expenditure of $246 billion in 2024, up from $151 billion the year before. That figure could surpass $320 billion in 2025 as companies embark on -- as Microsoft President Brad Smith said in a recent blog post -- a new industrial revolution. "However, AI requires hefty investments," PYMNTS wrote recently. "Training large language models uses thousands of GPUs (each Nvidia GPU costs about $10,000 or more) or specialized AI chips for a total of tens or hundreds of millions of dollars. Running these AI models at scale also requires high-performance data centers, which need more servers and require more cooling and maintenance." In addition, that report added, there's the cost of acquiring and preparing big datasets, six-figure salaries for AI researchers and engineers, continual research and development, regulatory compliance, and other expenditures. As the FT noted, the size of companies' AI ambitions -- announced with their recent earnings -- has surprised the market and worsened a stock selloff triggered following the release of Chinese startup DeepSeek's AI model last month. Both Google and Microsoft saw $200 billion in market value wiped out after reporting softer-than-anticipated growth in their cloud divisions and sharp increases in capital spending, the report added. Meanwhile, Amazon CEO Andy Jassy spent some time on last week's earnings call to discuss his impressions of DeepSeek. "For those of us who are building frontier models, we're all working on the same types of things, and we're all learning from one another," he said. "I think you have seen and will continue to see a lot of leapfrogging between us. There is a lot of innovation to come."

Amazon, Google, Microsoft, and Meta push AI spending to new heights, set to surpass $320 billion this year

Cutting corners: The artificial intelligence arms race among tech giants is reaching new heights as industry leaders unveil ambitious spending plans for 2025. This surge in expenditure comes despite recent developments suggesting that such massive investments might not be necessary - namely, the sudden (and arguably too early to call) success of Chinese startup DeepSeek, which claims to have developed an AI model comparable to those of Google and OpenAI at a fraction of the cost. Amazon has set the bar exceptionally high, announcing an unprecedented investment of over $100 billion in infrastructure, primarily focused on expanding its cloud computing arm, Amazon Web Services. This massive outlay represents a significant increase from the company's already substantial $77 billion expenditure in 2024, which itself was more than double the $48 billion spent in 2023. Amazon CEO Andy Jassy justified this enormous investment by citing "significant signals of demand" in the AI space. "The AI opportunity is as big as it comes, and that's why you're seeing us invest to meet that moment," Alphabet CEO Sundar Pichai Google's parent company, Alphabet, is not far behind, with CEO Sundar Pichai revealing plans to invest $75 billion in 2025, a 42 percent increase from the $53 billion spent in 2024. "The AI opportunity is as big as it comes, and that's why you're seeing us invest to meet that moment," Pichai said in explanation. He also addressed the DeepSeek development, suggesting that it would actually add to demand by demonstrating how new techniques could make AI more accessible and spur new lines of research. Microsoft has committed to spending $80 billion on expanding its Azure cloud platform. CEO Satya Nadella made this declaration at the World Economic Forum in Davos, underscoring the company's determination to maintain its competitive edge in AI. Microsoft's investment strategy is closely tied to its partnership with OpenAI, as it seeks to integrate advanced AI capabilities across its product lineup. Meta is also ramping up its AI investments. CEO Mark Zuckerberg has pledged to spend "hundreds of billions" more on AI over the long term, building upon the $40 billion invested in 2024. Meta's AI strategy differs somewhat from its competitors, focusing on improving ad targeting on its social media platforms and enhancing user experiences across its suite of apps. The combined capital expenditure of these four tech giants - Microsoft, Alphabet, Amazon, and Meta - reached a staggering $246 billion in 2024, a 63 percent increase from 2023. Their collective spending is projected to exceed $320 billion in 2025. These enormous investments stand in stark contrast to the apparent approach taken by DeepSeek. The Chinese AI lab claims to have built a reasoning model with capabilities similar to those of Google and OpenAI's products but at a significantly lower cost. To be sure, there is skepticism about DeepSeek's claims, particularly regarding the cost of developing its model. Nonetheless, the splash it has made in the AI scene has raised questions about the necessity of the massive spending plans announced by the tech giants. However, the major players seem undeterred by DeepSeek's achievement. They continue directing their investments toward building and expanding data centers, acquiring specialized AI chips, and conducting extensive research and development in AI technologies. The companies are competing to create more advanced large language models and to integrate AI capabilities across their product lines and services. Beyond the public tech giants, significant investments are also flowing into AI startups. OpenAI's Sam Altman has formed a partnership with SoftBank and Oracle to invest $100 billion in AI-related U.S. infrastructure, with the potential to increase to half a trillion dollars over time. The scale of these investments reflects the tech industry's conviction in AI's transformative potential, despite the challenges posed by more efficient models like DeepSeek's. "Could there be an AI winter at some point?" Rishi Jaluria, an analyst at RBC Capital Markets, said to the Financial Times. "Sure. But if you're in a position to be a leader, you can't take your foot off the gas."

Tech megacaps plan to spend more than $300 billion in 2025 as AI race intensifies

A picture shows logos of the Big Tech companies named GAFAM, for Google, Apple, Facebook, Amazon and Microsoft, on June 2, 2023. Megacap technology companies funneled billions of dollars into artificial intelligence last year to try and keep up with unfettered demand. The hype isn't dying down in 2025. Meta, Amazon, Alphabet and Microsoft intend to spend as much as $320 billion combined on AI technologies and datacenter buildouts in 2025, based on comments from their CEOs early this year and throughout earnings calls in the past two weeks. That's up from $230 billion on total capital expenditures in 2024. Tech companies have already poured many billions of dollars into AI projects since ChatGPT's 2022 debut, as they race to expand data centers with boatloads of Nvidia's graphics processing units (GPUs) and to advance their models. The recent rise of China's DeepSeek sent a shockwave through the sector, with estimates suggesting the open-source tool cost a fraction of some U.S.-based competitors to create. Those fears spurred a market selloff last week, pushing shares of AI chipmakers Nvidia and Broadcom down by a combined $800 billion in a single day. That development forced U.S. tech CEOs to field questions over their hefty spending plans and whether it's all necessary. The answer, so far, is that they're not slowing down. Amazon offered the most ambitious spending initiative among the four, aiming to shell out over $100 billion, up from $83 billion in 2024. CEO Andy Jassy said during the company's earnings call on Thursday that the money would mostly go toward AI for its Amazon Web Services division and a "once-in-a-lifetime type of business opportunity." "I think that both our business, our customers and shareholders will be happy, medium to long-term, that we're pursuing the capital opportunity and the business opportunity in AI," he said. Last month, Microsoft said it would allocate $80 billion in the 2025 fiscal year for creating data centers for AI workloads. Over half of that spending is poised to occur in the U.S., said Brad Smith, the company's president. Microsoft's fiscal year ends in June. Alphabet is targeting $75 billion in capital expenditures this year, with $16 billion to $18 billion expected in the first quarter. Finance chief Anat Ashkenazi said on Tuesday's earnings call that the majority of spending would go toward "technical infrastructure, primarily for servers, followed by data centers and networking." Meanwhile, Meta CEO Mark Zuckerberg set his company's AI capex budget at $60 billion to $65 billion in January, calling 2025 a "defining year for AI." In a Facebook post, he said the move would help "unlock historic innovation, and extend American technology leadership." The other three of the so-called Magnificent 7 are Apple, Tesla and Nvidia. Apple's spending on AI is tricky to project, often showing up in operating expenses because the company rents training capacity from cloud providers. The models underpinning Apple Intelligence were trained on Google Cloud, for example. Apple also rents cloud capacity from AWS and Azure. "On the capex part, it's important to remember that we employ a hybrid kind of approach where we do things internally and we have certain partners that we do business with externally where the capex would appear in their respective businesses," CEO Tim Cook said on an earnings call last year. Tesla said after its earnings report in late January that AI-related capital expenditures were approximately $5 billion in 2024, out of $11.34 billion total. The company expects its AI spending to be flat year over year. Tesla has been building out a "training cluster" dubbed Cortex, at its Texas facility to be used for training models behind the company's self-driving technology and humanoid robotics currently in development. Nvidia doesn't report results until later this month. And it's capex figures will look very different since Nvidia is the one developing and supplying AI technology, rather than buying it. For Amazon, Google and Microsoft, AI spending is high, but it's supposed to results in a big boon for their cloud businesses, which are major growth drivers. They've all said that clients are asking for more AI processing tools and that they plan to run bigger workloads in the cloud. But in the most recent quarter, the cloud numbers were weaker than expected, with all three companies falling short of consensus estimates. A big reason was supply shortages. "I predict those constraints really start to relax in the second half of 2025," Amazon's Jassy said. At Microsoft, the AI side of the Azure cloud business came in better than management had anticipated, but outside of AI, Azure lagged behind internal projections because of disappointing sales to clients through partners, finance chief Amy Hood said on the earnings call. Microsoft is revamping its sales approach when it comes to balancing AI with more traditional IT processes, Hood said.

What DeepSeek? Big tech keeps its AI building boom alive

Wall Street went into panic mode about two weeks ago after the Chinese startup DeepSeek released an artificial intelligence system that appeared to be radically more efficient than what its American competitors had built. The investors who had pumped trillions of dollars into tech stocks over the past few years worried whether the tens of billions of dollars that tech companies were spending on new data centers suddenly looked like comic overkill. But the biggest tech companies made clear in recent earnings reports that they believe there may be no such thing as overkill when it comes to new data centers. Amazon on Thursday implied that its capital expenditures -- a figure that includes data center construction and other items like warehouses -- could top $100 billion this year. Microsoft said its spending could surpass $80 billion. Alphabet said it would spend $75 billion, and Meta reaffirmed plans to have capital spending hit as much as $65 billion. Combined, they could spend roughly $100 billion more than last year on these projects. Executives urged patience. The problem right now, they said, is that customers want more AI than the companies can supply. And the only way they can meet demand is to build as much as they can as quickly as they can. "Whenever I see someone else do something better, I say, 'Ugh, we should have done that,'" Meta CEO Mark Zuckerberg told employees at a companywide meeting last week, according to a recording obtained by The New York Times. "Competition is good, but we need to make sure that we win." Here are some key points to understand this spend-happy moment for tech: Need for more data centers Many of the companies say they're constrained by the supply of chips, land and power needed to build data centers, and are racing to get more of them open. Microsoft, Alphabet and Amazon all said they could have had higher cloud computing sales if they had the capacity. Cloud services are the typical way AI is delivered to customers. Alphabet saw "demand that exceeds our available capacity," Anat Ashkenazi, Alphabet's finance chief, told investors. "So we'll be working hard to address that and make sure we bring more capacity online." Microsoft has been saying that it has been constrained for a while, and previously told investors that the pressure would ease early this year. But this past week, when it reported its latest earnings, executives told investors that it might take until summer to get enough capacity up and running to meet the full demand. Its stock fell about 5% in after-hours trading after the report. Expanding the use for AI While many people think about data centers as the enormously expensive, power-hungry places where advanced AI systems are developed, they are also where AI is deployed. Those are two different steps: training a model that underpins ChatGPT, versus asking ChatGPT for a recipe suggestion. Deploying AI is known as "inferencing" in the industry; it is where the tech companies increasingly say their businesses will boom. As costs come down, "AI will be much more ubiquitous," Microsoft CEO Satya Nadella told investors this past week. Amazon CEO Andy Jassy told investors on Thursday that while a world where every app was infused with AI could be hard to fathom, "this is the world we're thinking about all the time." That vision, he said, has inferencing at its core. He argued that lowering the costs of inferencing would follow the pattern of previous technological trends: As the systems become less expensive to deploy, Jassy said, customers will "get excited about what else they could build that they always thought was cost-prohibitive before, and they usually end up spending a lot more in total." Companies view Cloud providers are used to giving customers the illusion of endless supply, which means they must juggle having just enough data centers online to stream the video you want or answer your chatbot query. But they also can't build too far in advance, locking up billions of dollars that could be deployed elsewhere. Balancing those two -- particularly when securing land, chips and power for data centers can take years -- is one of the enormous challenges the companies face. Executives have argued that they can adapt how they use the investments, between building and deploying AI models, and between serving their own core business and those of customers. Nadella said Microsoft's infrastructure was "pretty fungible." Ashkenazi said Google was also flexible. It could, for example, "repurpose capacity" to serve Google Search instead of cloud customers. Zuckerberg said Meta was studying DeepSeek and the ways it created efficiencies, but that investing heavily in data centers would be a strategic advantage against a small and nimble competitor. "We serve a billion-plus people -- that's just a lot of people, so more and more of the fleet is going toward running inference," he told employees. Regardless of the explanation, cutting into profits -- even the gaudy profits of tech's biggest companies -- is unlikely to thrill investors. Every company saw its share price fall after its earnings report.

Big Tech presses on with massive AI spending plans for 2025

Big Tech's massive spending on artificial intelligence is set to continue unchecked in 2025 after Amazon topped its rivals on Thursday with a planned $100bn-plus investment in infrastructure this year. Spending by the four leading US tech companies had already surged 63 per cent to historic levels last year. Now executives are vowing to accelerate their AI investments, dismissing concerns about the vast sums being bet on the nascent technology. Microsoft, Alphabet, Amazon 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 centres and fill them with clusters of specialised chips to remain at the forefront of AI large language model research. The scale of their spending ambitions -- announced alongside their fourth-quarter earnings -- 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. Google's 8 per cent drop on Wednesday was its fifth-worst trading day in the past decade. "The unbridled enthusiasm across the entire 'Magnificent Seven' has been replaced by pockets of scepticism and created some 'show me' situations," said Jim Tierney, head of the concentrated US growth fund at AllianceBernstein. "The concerns that I've had since summer are magnified today." Amid the hype about AI's transformative potential, shareholders 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, whilst 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. "If or when we see the cloud growth acceleration at Google or [Microsoft's] Azure, or see Copilot uptake improve, investors will be more comfortable with spending at Alphabet or Microsoft," said Tierney. "Cheaper and more commoditised AI models will probably amplify investor concerns in the meantime." DeepSeek's R1 model was emblematic of such fears. The Chinese AI lab's claim to have built a reasoning model with similar capabilities to Google and OpenAI's products at a fraction of the price -- and without access to Nvidia's most advanced graphic processing units -- caused the chipmaker's stock to plunge 17 per cent, erasing $600bn in one day, from which it has only partially recovered. Big Tech chiefs have held their nerve. On Tuesday, Google's Sundar Pichai said in defence of his plan to spend $75bn in 2025 -- up 42 per cent from $53bn last year -- that the AI opportunity was "as big as it comes, and that's why you're seeing us invest to meet that moment". DeepSeek would add to demand by showing how new techniques could make it cheaper and spur new lines of research, he said. Microsoft's Satya Nadella said two weeks ago in Davos: "I am going to spend $80bn building out Azure, customers can count on Microsoft." He reiterated his belief in the folly of slowing down and failing to capitalise on its early backing of start-up OpenAI. And on Thursday, Amazon CEO Andy Jassy topped Google and Microsoft by forecasting more than $100bn in capital expenditure this year, up from $77bn in 2024 and more than double the $48bn of the previous year. The vast majority will go towards data centres and servers for Amazon Web Services, and Jassy said he was simply responding to "significant signals of demand". The stock fell as much as 7 per cent in after-hours trading. "Growth is cooking along a little bit, but the appetite to invest hasn't been curtailed," said Jeff Pearson, vice-president of cloud strategy at consultancy Presidio. "They are ploughing ahead even if the return on investment seems distant." Meta received a more positive reception to its earnings, with its shares rising even as chief Mark Zuckerberg pledged to spend "hundreds of billions" more on AI, on top of the $40bn invested in 2024. "Investors have embraced Meta, even though their capex is growing, because there is a real-time return-on-investment improvement in client spending that is measurable," said Tierny, referring to Meta's use of AI to improve ad targeting on Facebook and Instagram. Meta's success in showing tangible returns from AI investment stood in contrast to Google, which faces new competitors and the difficult task of integrating AI into search without cannibalising its core advertising business. The search giant has introduced brief answers, or "AI overviews", at the top of search results, but these are displacing its lists of links, the first of which are often lucratively sponsored. Nevertheless, "if there's meant to be cracks in Google's search empire, it certainly isn't showing up yet", said Bernstein analyst Mark Shmulik, pointing to a 13 per cent growth in ad revenue to $54bn in the final three months of 2024 alone. "Google hasn't missed search expectations even once since ChatGPT launched nine quarters ago." Spending among the "Magnificent Seven" -- which also includes Apple, Nvidia and Tesla -- dwarfs the rest of the US benchmark S&P 500. Their capital spending rose 40 per cent in 2024 compared with 3.5 per cent among the remaining 493 companies, according to Société Générale. Profits among the elite group soared by a third in the same period, versus 5 per cent among the rest. The spending spree is not limited to publicly listed companies, and neither Deep Seek nor fears of an AI bubble have slowed the flow of capital into Silicon Valley start-ups. OpenAI's Sam Altman has formed a partnership with SoftBank and Oracle to invest $100bn in AI-related US infrastructure, potentially rising to half a trillion over time. The Japanese investor is in talks to invest $25bn in the start-up at a valuation of $260bn. "Could there be an AI winter at some point? Sure," said Rishi Jaluria, an analyst at RBC Capital Markets. "But if you're in a position to be a leader, you can't take your foot off the gas."

Amazon plans an AI spending spree, joining Meta, Microsoft, and Google

Amazon (AMZN+0.84%) is the latest technology giant to announce it will continue spending massive amounts of cash on artificial intelligence, even after Chinese startup DeepSeek's success. CEO Andy Jassy said on an earnings call on Thursday that the company's $26.3 billion in capital expenditures last quarter is "reasonably representative" of what has been budgeted for 2025. If continued, that would put Amazon on track to spend more than $100 billion this year, which most of the cash supporting AI services and tech infrastructure. "The vast majority of that CapEx spend is on AI for [Amazon Web Services]," Jassy said on the call, calling that spending a "good sign" for AWS. "[W]e think virtually every application that we know of today is going to be reinvented with AI inside of it and with inference being a core building block, just like compute and storage and database." Amazon has introduced a number of new AI-based products and invested heavily in Anthropic, a startup founded by ex-OpenAI staffers. The Seattle-based company in December even unveiled its own AI training chips, the Trainium3, which are expected to be available in late 2025. It's not the only tech leader planning to spend billions on AI this year, as demand remains intense. Microsoft (MSFT+0.25%) in early January said it plans to spend $80 billion on AI data centers in its fiscal year 2025, which ends on June 30. The data centers will be used for training and deploying AI models and cloud-based applications. More than half of the investment will be focused in the U.S., Microsoft President Brad Smith said at the time. "As we look into the future, it's clear that artificial intelligence is poised to become a world-changing GPT [General-Purpose Technology]," Smith said in a statement. "AI promises to drive innovation and boost productivity in every sector of the economy. Later in January, Meta Platforms (META+0.58%) CEO Mark Zuckerberg said in a blog post that the Facebook and Instagram-owned will spend between $60 billion and $65 billion in capital expenditures on AI this year. He wrote that Meta's Llama 4 model is expected to "become the leading state of the art model" this year, and that the company plans to "build an AI engineer" that can contribute more code to its research and development efforts. Google-parent (GOOGL-0.08%) Alphabet said it would spend $75 billion on AI this year, 29% greater than Wall Street had expected. "The cost of actually using [AI] is going to keep coming down, which will make more use cases feasible," CEO Sundar Pichai said on an earnings call, adding that Google is investing to "meet the moment." OpenAI last month announced Stargate, a planned $500 billion AI infrastructure project backed by SoftBank (SFTBY-2.59%) and Oracle (ORCL+0.42%), among others. That cash would be doled out over the next four years. Silicon Valley's major spending on AI was called into question after DeepSeek claimed it had spent cost just $5.6 million to train and develop an AI model that rivaled models made by OpenAI and Meta. Tech stocks entered a freefall after Wall Street caught wind, giving chipmaker Nvidia (NVDA+2.77%) the biggest one-day drop in market value in history. However, some tech leaders are calling into question whether what DeepSeek achieved was actually done on such a low budget. Meta has reportedly set up "war rooms" to investigate the models, while Microsoft is probing whether DeepSeek had access to OpenAI's tech.

Big Tech's AI spending rattles markets

San Francisco (AFP) - E-commerce giant Amazon reported strong earnings Thursday but, like its big tech peers Microsoft and Google, saw its stock price fall on concerns over high AI investment costs. The mounting expenses of data-intensive artificial intelligence and its infrastructure have cast a shadow over this earnings season, with only Facebook owner Meta winning Wall Street's approval. Meta's stock surged 18 percent in January as investors endorsed its AI strategy. Amazon's AWS cloud division, along with rivals Microsoft and Google, are investing heavily in AI data centers while meaningful returns remain uncertain. Amazon CEO Andy Jassy defended the spending, saying the company was on track to spend $100 billion on capital expenditure in 2025, with the "vast majority" on AI. On a call with analysts, he dubbed AI a "once in a lifetime" business opportunity that couldn't be missed. The emergence of China's lower-cost DeepSeek model has raised questions about such massive spending. Despite US government efforts to maintain AI dominance through export controls on advanced chips, DeepSeek has achieved comparable results using authorized, less sophisticated Nvidia semiconductors. Microsoft, leading the generative AI revolution through its OpenAI partnership, plans to invest about $80 billion in AI this fiscal year. And while it has rapidly deployed AI features under its Gemini brand, Google's Cloud revenue missed expectations, despite growing 30 percent to $12 billion. Google also announced plans for $75 billion in capital expenditures for 2025, surprising analysts. Amazon on Thursday reported its fourth-quarter net income doubled to $20 billion, with net sales rising 10 percent to $187.8 billion. AWS remained profitable with sales growing 19 percent to $28.8 billion, though slightly below market expectations. Jassy celebrated "the most successful holiday shopping season yet." However, Amazon's shares dropped more than 5 percent in after-hours trading, mirroring reactions to Microsoft and Google's results - strong profits overshadowed by concerns about AI spending. "Amazon delivered a knockout quarter, but a touch of softness in first quarter guidance has sent shares into a bit of a post-earnings wobble," said Matt Britzman, a senior equity researcher at Hargreaves Lansdown. Amazon's forecast of 5-9 percent growth for first-quarter 2025, with sales between $151.0 billion and $155.5 billion, also fell short of analyst expectations and weighed on the stock price. Independent tech analyst Rob Enderle suggested the conservative guidance might reflect uncertainty over US-China trade tensions. "With the tariff uncertainty, Amazon is being much more conservative right now than they otherwise would be," he said. China could also be a problem for Apple, which posted a record profit of $36.3 billion last week. But Apple lost its status as the best selling smartphone brand in the crucial Chinese market last year and could be negatively affected by the trade battles pitting the Trump administration against Beijing.

Tech giants to spend $320 billion on AI in 2025 - Meta, Amazon, Alphabet & Microsoft lead the race! What about Apple, Tesla, and Nvidia?

Tech giants Meta, Amazon, Alphabet, and Microsoft are set to spend a record $320 billion on AI and data centers in 2025, up from $230 billion in 2024. The AI race is heating up, with companies investing heavily in infrastructure and cloud computing to stay ahead. With massive investments, 2025 is shaping up to be a defining year for AI innovation and expansion.Tech giants are gearing up for record-breaking investments in artificial intelligence (AI) and data centers in 2025. Meta, Amazon, Alphabet, and Microsoft plan to allocate up to $320 billion combined, marking a significant increase from $230 billion in 2024. Their aggressive spending highlights the intensifying AI competition and the need for advanced infrastructure. The push for AI expansion started in 2022 after the introduction of ChatGPT. Since then, companies have been pouring billions into AI projects, focusing on building massive data centers powered by Nvidia GPUs. The emergence of China's DeepSeek, an open-source AI tool developed at a fraction of U.S. competitors' costs, has added pressure on American firms to accelerate their AI advancements. Concerns over market competition led to a selloff last week, causing Nvidia and Broadcom's stock values to drop by a combined $800 billion in a single day. Despite this, U.S. tech CEOs remain committed to expanding AI spending, seeing it as a long-term growth opportunity. Amazon: Over $100 Billion for AI and Cloud Expansion Amazon has outlined the most ambitious AI spending plan, surpassing $100 billion in 2025, up from $83 billion in 2024. CEO Andy Jassy emphasized that most of this budget will be allocated to Amazon Web Services (AWS), which he called a "once-in-a-lifetime type of business opportunity." Microsoft: $80 Billion for AI Data Centers Microsoft has committed $80 billion for AI-related investments in the 2025 fiscal year, with more than half of that targeted at U.S.-based projects. Brad Smith, the company's president, noted that Microsoft is focusing on expanding AI workloads in its cloud infrastructure. Alphabet: $75 Billion for AI Infrastructure Google's parent company Alphabet is set to spend $75 billion in capital expenditures in 2025, with $16-$18 billion planned for the first quarter alone. According to finance chief Anat Ashkenazi, most of this will be used to enhance the company's "technical infrastructure, primarily for servers, followed by data centers and networking." Meta: $60-$65 Billion for AI Growth Meta CEO Mark Zuckerberg has allocated between $60 billion and $65 billion for AI expansion in 2025. He described this as a "defining year for AI," emphasizing that the investment would "unlock historic innovation and extend American technology leadership." Apple: AI Investments Through Cloud Partnerships Apple's AI spending is harder to track since it rents AI training capacity from external cloud providers like Google Cloud, AWS, and Microsoft Azure. CEO Tim Cook mentioned in an earlier earnings call that Apple employs a hybrid AI approach, mixing internal investments with external partnerships. Tesla: $5 Billion AI Spending in 2025 Tesla's AI capital expenditure was approximately $5 billion in 2024, and the company expects a similar level of investment in 2025. Tesla is developing its AI training cluster, Cortex, at its Texas facility to enhance self-driving technology and humanoid robotics. Nvidia: AI Supplier, Not Buyer Nvidia, unlike its peers, is a supplier of AI technology rather than a buyer. The company is set to report earnings later this month, providing further clarity on its AI investments. Despite massive investments, cloud revenues from AI services have underperformed expectations due to supply shortages. Amazon's Andy Jassy predicts these constraints will ease by the second half of 2025. Meanwhile, Microsoft is revamping its sales strategy to balance AI and traditional IT offerings after Azure's performance fell short of internal projections. How much are tech giants spending on AI in 2025? They plan to invest up to $320 billion in AI and data centers. Which company is leading in AI spending? Amazon leads with over $100 billion allocated for AI and cloud growth.

Big Tech's AI spending rattles markets

SAN FRANCISCO (AFP) - E-commerce giant Amazon reported strong earnings Thursday but, like its big tech peers Microsoft and Google, saw its stock price fall on concerns over high AI investment costs. The mounting expenses of data-intensive artificial intelligence and its infrastructure have cast a shadow over this earnings season, with only Facebook owner Meta winning Wall Street's approval. Meta's stock surged 18 percent in January as investors endorsed its AI strategy. Amazon's AWS cloud division, along with rivals Microsoft and Google, are investing heavily in AI data centers while meaningful returns remain uncertain. Amazon CEO Andy Jassy defended the spending, saying the company was on track to spend USD100 billion on capital expenditure in 2025, with the "vast majority" on AI. On a call with analysts, he dubbed AI a "once in a lifetime" business opportunity that couldn't be missed. The emergence of China's lower-cost DeepSeek model has raised questions about such massive spending. Despite US government efforts to maintain AI dominance through export controls on advanced chips, DeepSeek has achieved comparable results using authorized, less sophisticated Nvidia semiconductors. Microsoft, leading the generative AI revolution through its OpenAI partnership, plans to invest about USD80 billion in AI this fiscal year. And while it has rapidly deployed AI features under its Gemini brand, Google's Cloud revenue missed expectations, despite growing 30 percent to $12 billion. Google also announced plans for USD75 billion in capital expenditures for 2025, surprising analysts. Amazon on Thursday reported its fourth-quarter net income doubled to USD20 billion, with net sales rising 10 pe rcent to USD187.8 billion. AWS remained profitable with sales growing 19 per cent to USD28.8 billion, though slightly below market expectations. Jassy celebrated "the most successful holiday shopping season yet." However, Amazon's shares dropped more than 5 per cent in after-hours trading, mirroring reactions to Microsoft and Google's results - strong profits overshadowed by concerns about AI spending. "Amazon delivered a knockout quarter, but a touch of softness in first quarter guidance has sent shares into a bit of a post-earnings wobble," said Matt Britzman, a senior equity researcher at Hargreaves Lansdown. Amazon's forecast of 5-9 percent growth for first-quarter 2025, with sales between USD151.0 billion and USD155.5 billion, also fell short of analyst expectations and weighed on the stock price. Independent tech analyst Rob Enderle suggested the conservative guidance might reflect uncertainty over US-China trade tensions. "With the tariff uncertainty, Amazon is being much more conservative right now than they otherwise would be," he said. China could also be a problem for Apple, which posted a record profit of USD36.3 billion last week. But Apple lost its status as the best selling smartphone brand in the crucial Chinese market last year and could be negatively affected by the trade battles pitting the Trump administration against Beijing.

Amazon doubles down on AI with a massive $100B spending plan for 2025 | TechCrunch

Despite all the buzz last week that DeepSeek would herald in an era of lower AI budgets, there is zero sign that Big Tech is slowing down. Instead, they're ramping things up. Amazon is the latest tech giant to announce a massive AI spending plan with well over $100 billion in predicted capital expenditures for 2025. The "vast majority" of that $100 billion will go toward AI capabilities for its cloud division AWS, CEO Andy Jassy said during Amazon's fourth-quarter earnings call Thursday. (More specifically, Jassy said Q4 2024's capex spending of $26.3 billion "is reasonably representative" of what to expect on an annualized basis in 2025. Multiplying that quarterly spend by four gets a cool $105.2 billion.) That's a huge jump from the $75 billion in capex that Amazon expected spend in 2024. Amazon brushed aside concerns about AI getting so cheap that it would harm its revenue. Instead, Jassy said lower prices would just lead to increased demand for AI. And AWS, which has AI offerings galore, stands to benefit, he argued. "Sometimes people make the assumption that if you're able to decrease the cost of any type of technology component ... that somehow it leads to less total spend in technology. We've never seen that to be the case," Jassy said, comparing the boom in AI demand to the early days of the Internet and cloud. Other Big Tech companies are making the same point this earnings season as worries mount about the returns on their skyrocketing AI expenses. Meta CEO Mark Zuckerberg declared last week the company would spend "hundreds of billions" on AI in the long term, citing rising inference demand across its billions of users. Meta is slated to spend at least $60 billion on capex in 2025, mostly on AI. Meanwhile, Alphabet just boosted its capex for 2025 by a whopping 42% to $75 billion, with CEO Sundar Pichai justifying the spending by saying that decreased AI costs "will make more use cases feasible." And Microsoft announced last month that it would spend $80 billion on AI data centers in 2025 alone. Microsoft CEO Satya Nadella even tweeted the Wikipedia page for Jevons Paradox (the concept in economics that lower prices leads to increased demand) right as the DeepSeek discussion was heating up. Whether Jevons Paradox pans out for Big Tech this time remains to be seen. But for now, there's no signs of any AI spending slowdown just yet.

Big Tech's AI spending rattles markets

View of a U.S. Amazon company shipping warehouse in the municipality of Apodaca, Nuevo Leon State, Mexico, take, Jan. 23. AFP-Yonhap E-commerce giant Amazon reported strong earnings Thursday but, like its big tech peers Microsoft and Google, saw its stock price fall on concerns over high AI investment costs. The mounting expenses of data-intensive artificial intelligence and its infrastructure have cast a shadow over this earnings season, with only Facebook owner Meta winning Wall Street's approval. Meta's stock surged 18 percent in January as investors endorsed its AI strategy. Amazon's AWS cloud division, along with rivals Microsoft and Google, are investing heavily in AI data centers while meaningful returns remain uncertain. Amazon CEO Andy Jassy defended the spending, saying the company was on track to spend $100 billion on capital expenditure in 2025, with the "vast majority" on AI. On a call with analysts, he dubbed AI a "once in a lifetime" business opportunity that couldn't be missed. The emergence of China's lower-cost DeepSeek model has raised questions about such massive spending. Despite U.S. government efforts to maintain AI dominance through export controls on advanced chips, DeepSeek has achieved comparable results using authorized, less sophisticated Nvidia semiconductors. Microsoft, leading the generative AI revolution through its OpenAI partnership, plans to invest about $80 billion in AI this fiscal year. And while it has rapidly deployed AI features under its Gemini brand, Google's Cloud revenue missed expectations, despite growing 30 percent to $12 billion. Google also announced plans for $75 billion in capital expenditures for 2025, surprising analysts. Amazon on Thursday reported its fourth-quarter net income doubled to $20 billion, with net sales rising 10 percent to $187.8 billion. AWS remained profitable with sales growing 19 percent to $28.8 billion, though slightly below market expectations. Jassy celebrated "the most successful holiday shopping season yet." However, Amazon's shares dropped more than 5 percent in after-hours trading, mirroring reactions to Microsoft and Google's results - strong profits overshadowed by concerns about AI spending. "Amazon delivered a knockout quarter, but a touch of softness in first quarter guidance has sent shares into a bit of a post-earnings wobble," said Matt Britzman, a senior equity researcher at Hargreaves Lansdown. Amazon's forecast of 5-9 percent growth for first-quarter 2025, with sales between $151.0 billion and $155.5 billion, also fell short of analyst expectations and weighed on the stock price. Independent tech analyst Rob Enderle suggested the conservative guidance might reflect uncertainty over U.S.-China trade tensions. "With the tariff uncertainty, Amazon is being much more conservative right now than they otherwise would be," he said. China could also be a problem for Apple, which posted a record profit of $36.3 billion last week. But Apple lost its status as the best selling smartphone brand in the crucial Chinese market last year and could be negatively affected by the trade battles pitting the Trump administration against Beijing. (Yonhap)

Amazon Follows Google, Meta, and Microsoft With Plans To Boost Spending on AI

Amazon (AMZN) said it expects to spend over $100 billion in capital expenditures this year, making it the latest tech giant to say it's ramping up investments in artificial intelligence infrastructure. The $26.3 billion Amazon spent on capex in the fourth quarter is "reasonably representative" of the rate it expects to spend in 2025, CEO Andy Jassy said on the company's earnings call. That would bring Amazon's capex over $100 billion for the full year, the "vast majority" of which would go toward AI for Amazon Web Services, he said. That comes after Amazon recently rolled out Trainium2, the latest model of its in-house chips. The company is working with Anthropic, the startup behind the Claude large language model, to build a server containing hundreds of thousands of Trainium2 chips with significantly more computing power than the current Claude models were trained on. Looking ahead, Jassy said Amazon expects to preview even more powerful Trainium3 chips later this year. Amazon's plans to ramp spending on AI follow similar moves by its Big Tech peers. Just earlier this week, Google parent Alphabet (GOOGL) forecast $75 billion in capital expenditures this year to support expanding its AI capacity. Last week, Meta (META) said it plans to invest $60 billion to $65 billion this year, while Microsoft (MSFT) said it plans to spend $80 billion on infrastructure in its 2025 fiscal year. "We're all learning from one another," Jassy said Thursday, nodding to Amazon's U.S. rivals as well as Chinese AI startup DeepSeek, adding that Amazon has added DeepSeek models to its Bedrock and SageMaker development platforms. "You have seen and will continue to see a lot of leapfrogging between us." The rapid rise of DeepSeek, which recently claimed to develop a competitive AI model for a fraction of the cost of stateside competitors, has raised concerns about American firms' spending on AI. However, Bank of America analysts said the development could be "AI's Sputnik moment," with growing competition pushing U.S. hyperscalers like Amazon to act with greater urgency and raise their investments rather than pull back. Shares of Amazon slid 4% in extended trading Thursday after the company's earnings call and its outlook missed estimates. The stock was up 40% over the past 12 months through Thursday's close.

Amazon is betting $100 billion on AI: Will it pay off like Nvidia?

Amazon announced plans to increase its capital expenditures to $100 billion in 2025, focusing on investments in artificial intelligence. This figure surpasses last year's spending of approximately $83 billion. CEO Andy Jassy stated during a call with investors that Q4 capital expenditures of $26.3 billion were indicative of an annualized rate expected in 2025, with the "vast majority" directed toward AI for Amazon Web Services (AWS). The company is accelerating investments in data centers, networking hardware, and other infrastructure to meet the growing demand for generative AI, which surged following the release of OpenAI's ChatGPT in late 2022. Amazon has launched several AI initiatives, including the Nova models, Trainium chips, a shopping chatbot, and a marketplace for third-party models known as Bedrock. Amazon's announcement came after it reported mixed results for the fourth quarter, projecting weaker-than-expected sales for the current period. This news overshadowed a profitable quarter, where the company achieved a net profit of $20 billion, almost double the $10.6 billion reported for the same period a year prior. Despite this strong performance, Amazon shares fell over 4% in after-hours trading. Jassy addressed investor concerns, describing the increased spending as a "once-in-a-lifetime type of business opportunity," and expressed confidence that both customers and shareholders would benefit in the medium to long term. He noted that capital expenditures would also be directed towards enhancing the efficiency of Amazon's retail operations. Other tech firms are investing heavily in AI as well. Alphabet, Google's parent company, expects to spend approximately $75 billion on capital expenditures this year, while Microsoft plans to allocate $80 billion in fiscal 2025 for AI-driven data center expansion. Meta has also announced intentions to invest up to $65 billion on similar infrastructure. Amazon's strong financial position is supported by robust margins across its various business segments, including AWS, which reported a 37% operating profit margin in Q4, translating to $10.6 billion on revenues of $28.8 billion. The company's advertising division is believed to carry an even better profit margin than AWS, although detailed profit metrics for advertising are not disclosed. In 2024, Amazon's operating expenses grew only 6%, while total revenue increased by 11%. The company's quarterly revenue for Q4 was over $187 billion, a 10% year-over-year growth, making it likely that Amazon has outperformed Walmart in quarterly sales for the first time. DeepSeek rocked the market once and here's why it could happen again Jassy indicated that operational efficiencies have continued to improve, with costs per shopping order decreasing due to a restructured warehouse network that minimizes transportation costs and speeds up deliveries. Despite the successful financial results for the last quarter of 2024, Amazon's stock reaction reflects investor uncertainty regarding the company's first-quarter guidance, which fell short of analyst expectations. Executives attributed this guidance to "unusually large" foreign exchange impacts and the Leap Year effect of having an extra day of sales in the previous quarter. A recent success of Chinese AI startup DeepSeek, which claimed to have developed a competitive AI model at a fraction of the cost, has led to skepticism about the spending strategies of major tech companies. In response, Jassy emphasized that future reductions in the costs of training and running AI models could lead to a broader adoption of AI across industries, enhancing corporate efficiencies.

Amazon expects $100 billion of capex in 2025 on 'once-in-a-lifetime' AI opportunity

Amazon CEO Andy Jassy speaks during a keynote address at AWS re:Invent 2024, a conference hosted by Amazon Web Services, at The Venetian Las Vegas on December 3, 2024 in Las Vegas, Nevada. Amazon said Thursday it plans to boost its capital expenditures to $100 billion in 2025, as it continues its investments in artificial intelligence. The capex figure exceeds last year's spending of roughly $83 billion. Amazon CEO Andy Jassy had predicted in October that the company's 2025 capex would surpass last year's figure, primarily driven by growth in generative AI. "We spent $26.3 billion in capex in Q4, and I think that is reasonably representative of what you expect an annualized capex rate in 2025," Jassy said on call with investors after the company released its fourth-quarter earnings report. "The vast majority of that capex spend is on AI for AWS." Amazon has been rushing to invest in data centers, networking gear and hardware to meet vast demand for generative AI, which has exploded in popularity since OpenAI released its ChatGPT assistant in late 2022. Amazon has introduced a flurry of AI products, including its own set of Nova models, Trainium chips, a shopping chatbot, and a marketplace for third-party models called Bedrock. Other tech companies are also spending big on AI. Google parent Alphabet said Tuesday it expects to invest about $75 billion in capital expenditures this year. Last month, Microsoft said it planned to spend $80 billion in fiscal 2025 on the buildout of data centers to support AI workloads. Meta said it will spend as much as $65 billion on capital expenditures as it works to construct more data center and computing infrastructure. Amazon gave an update on its spending plans after reporting mixed results for the fourth quarter. The company projected weaker-than-expected sales for the current period, which overshadowed a beat on the top and bottom lines in the fourth quarter. Shares fell more than 4% in extended trading. Jassy tried to reassure investors on the call that the jump in spending will be worthwhile, calling it a "once-in-a-lifetime type of business opportunity." "I think that both our business, our customers and shareholders will be happy, medium to long-term, that we're pursuing the capital opportunity and the business opportunity in AI," Jassy said. "We also have capex that we're spending this year in our stores business, really with an aim towards trying to continue to improve the delivery speed and our cost to serve." Tech companies are facing fresh skepticism of their AI spending plans after the early success of Chinese AI startup DeepSeek. The lab claims it only took two months and less than $6 million to develop its R1 model, which it says rivals OpenAI's o1. Markets were roiled by the launch last week, with chipmakers Nvidia and Broadcom losing a combined $800 billion in market cap.

Amazon, Like Microsoft, Says It Can't Keep Up With AI Demand

(Bloomberg) -- Amazon.com Inc. warned investors that it could face capacity constraints in its cloud computing division despite plans to invest some $100 billion this year, with most of the money going toward data centers, homegrown chips and other equipment to provide artificial intelligence services. Chief Executive Officer Andy Jassy, determined for Amazon to become an AI supermarket, is spending big to retain the company's edge in cloud-computing services. Still, he warned growth would be "lumpy" and hinted Amazon could face capacity issues related to delays in getting hardware and not having sufficient electricity. "It is true we could be growing faster were it not for some of the constraints on capacity," Jassy said on a conference call Thursday after the release of fourth-quarter results. The concerns echo those of rival Microsoft Corp., which last week said its cloud sales growth was hurt because it didn't have enough data centers to handle demand for its AI products. Jassy said the supply of chips -- from third parties and Amazon's own chip design unit -- and power capacity are limiting the ability of Amazon Web Services to bring new data centers online. Those constraints will likely ease in the second half of 2025, he said. Amazon spent $26.3 billion in capital expenditures in the last three months of 2024, the vast majority of which went toward AI-related projects within AWS. Jassy told analysts on the call that the amount was "reasonably representative" of the rate of outlays the company planned to make in 2025. The company reported that AWS revenue jumped 19% to $28.8 billion in the quarter ended Dec. 31. It was the third straight period of 19% growth for the cloud unit. Operating income generated by the unit was $10.6 billion, exceeding the average projection of $10.1 billion. "AWS growth did not accelerate as anticipated and instead matched Q3 levels, indicating that the company is challenged by the same types of capacity constraints facing rivals Google and Microsoft," said Sky Canaves, an analyst at Emarketer. Jassy's warning on AWS growth constraints overshadowed a fairly strong holiday quarter, suggesting the company's main e-commerce and logistics business is fending off competition from Walmart Inc. and discount upstarts like Temu and Shein. The shares declined about 3% in premarket trading on Friday after closing at $238.83 in New York. The stock has gained 8.9% so far this year after a 44% jump in 2024. The AI race will likely weigh down profits. Operating income will be $14 billion to $18 billion in the period ending in March, the Seattle-based company said in a statement. Analysts, on average, projected $18.2 billion, according to data compiled by Bloomberg. First-quarter sales will be as much as $155.5 billion, compared with an average estimate of $158.6 billion. While Amazon's overall quarter was generally positive, "investors immediate concerns are around Q1 guidance, which was below expectations, mostly because of the impact of a big currency drag and the impact of lapping a leap year," said Gil Luria, an analyst at DA Davidson & Co. The company said the extra day in the quarter in 2024 boosted sales by about $1.5 billion. Total revenue in the holiday quarter increased 10% to $187.8 billion, slightly ahead of analyst estimates. Operating profit was $21.2 billion, compared with the average estimate of $18.8 billion. Total operating expenses rose 6.2% to $166.6 billion -- marking the eighth consecutive quarter that Amazon's revenue increased at a higher rate than costs. The company employed more than 1.55 million full- and part-time workers at the end of the quarter, a 2% increase from a year earlier. (Updates with premarket share move in tenth paragraph)

Amazon To Pour Nearly $100 Billion Into AI In 2025, Surpassing Microsoft And Alphabet -- Andy Jassy Says 'Cost Of Inference Will Meaningfully Come Down' Amid DeepSeek Worries - Amazon.com (NASDAQ:AMZN)

Amazon.com Inc. AMZN plans to invest about $100 billion in artificial intelligence initiatives this year, placing it ahead of its competitors. What Happened: On Thursday, during Amazon's fourth-quarter earnings call, CEO Andy Jassy said the company's $26.3 billion spending in the last quarter of 2024 reflects its planned quarterly investments for 2025. This amount covers all business areas, including retail. Most of the funds will go to Amazon Web Services, which runs data centers and provides software tools. He praised DeepSeek's emergence as a lower-cost competitor outperforming models from companies like OpenAI and predicted that lower costs and greater efficiency would drive increased customer spending. See Also: Apple Watch Faces Are A Mess -- Series 10's Biggest Feature Is Limited To Just Four Faces, Frustrating Users He said some assume that lowering the cost of a technology component, specifically inference in this case, would reduce overall spending. However, this has never been the case. "Companies will spend a lot less per unit of infrastructure, and that is very, very useful for their businesses," Jassy stated, adding, "But then they get excited about what else they could build . . . they usually end up spending a lot more in total." "I believe the cost of inference will meaningfully come down," he stated, adding that this will make it easier for companies to integrate inference and generative AI into their applications. Why It Matters: Amazon's fourth-quarter revenues increased by 10% year-on-year to $187.8 billion, slightly exceeding estimates. However, the company anticipates lower net sales for the current quarter. Amazon's aggressive AI investments align with rivals like Alphabet ($75 billion) and Microsoft ($80 billion), all vying for industry dominance. Last month, China's DeepSeek-R1 was made available to access on platforms like Microsoft Azure and AWS. Price Action: Amazon's stock dropped 4.05% in after-hours trading, settling at $229.16. Earlier on Thursday, it had closed at $238.83, marking a 1.13% gain, according to Benzinga Pro data. Image via Shutterstock Read Next: Google Joins Meta, Amazon In Winding Up DEI Hiring -- Memo Reveals Details Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AMZNAmazon.com Inc$229.16-2.97%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

Amazon on pace for $100B+ in yearly capex; Jassy expects cost efficiencies to drive AI demand

Amazon reported $26.3 billion in capital expenditures in the fourth quarter, and the company plans to keep spending at that pace in 2025, which would put the total at more than $100 billion for the year. The "vast majority" will go toward building out capacity for artificial intelligence in Amazon Web Services, said Amazon CEO Andy Jassy during the company's earnings conference call with analysts. Asked about the AI cost efficiencies represented by DeepSeek's widely followed advances, Jassy echoed the sentiments of other tech leaders in saying that he expects the trend to increase overall AI demand. When the cost of a technology component like AI inference comes down, Jassy said, it doesn't mean companies will spend less overall on technology. Instead, he asserted, they get excited about building new things that were previously cost-prohibitive, and end up spending more in total on technology. "AI represents, for sure, the biggest opportunity since cloud, and probably the biggest technology shift and opportunity in business since the internet," he said. Amazon's capital spending was about $78 billion for 2024. Amazon's total capital spending also includes the buildout of its e-commerce fulfillment network and retail stores, which means it's not directly comparable to Microsoft, Google and others. Microsoft is spending $80 billion on capital expenditures this fiscal year, which ends in June; and Google expects to spend $75 billion for the calendar year. For the fourth quarter, Amazon beat Wall Street's overall expectations with $187.8 billion in net sales, up 10%. Quarterly profits surpassed $20 billion for the first time, up more than 88% from a year ago. However, Amazon Web Services growth was slightly lower than expected, with sales of $28.8 billion, an increase of just under 19%, compared with expectations of 19.3% in advance of the report.