Major technology firms, including Microsoft, Alphabet, and Meta, have released their latest quarterly earnings, but the results are being overshadowed by mounting concerns over a potential artificial intelligence bubble. Despite robust revenue figures for some, significant investments in AI infrastructure are raising questions about long-term profitability and sustainability.
Key Takeaways
Microsoft's substantial AI infrastructure spending, nearing $35bn, is raising investor eyebrows despite revenue growth.
Alphabet posted a record-breaking $102.35bn quarter, with its search and cloud divisions performing strongly.
Meta experienced a significant share price drop amid anticipation of "notably larger" capital expenses for AI.
Microsoft's AI Spending Surge
Microsoft reported that its expenditure on AI infrastructure reached nearly $35 billion in the three months leading up to September. This represents a considerable increase from the previous year. Although revenue climbed by 18% and net income rose by 12%, the company's shares saw a dip of nearly 4% in after-hours trading. Investors are reportedly wary of the escalating costs associated with maintaining the current AI boom. Microsoft, which recently became the world's second most valuable company due to its stake in ChatGPT maker OpenAI, has seen its market capitalisation approach $4 trillion, a figure now under scrutiny.
Alphabet's Record Quarter Amidst AI Competition
In contrast, Alphabet, the parent company of Google, experienced a surge of 6% in its share price following its earnings announcement. The tech giant achieved a historic quarter, with total revenue reaching an impressive $102.35 billion. Its advertising unit demonstrated resilience, even as new AI startups emerge, including OpenAI's browser designed to challenge Google Chrome. Analysts remain optimistic, with some believing Alphabet is well-positioned for long-term AI leadership, citing the positive reception of features like "AI Overviews" and "AI Mode" which are helping to alleviate fears about the threat to Google's core search business.
Meta's AI Ambitions and Investor Concerns
Meta, the parent company of Facebook, Instagram, and WhatsApp, faced a more challenging reception, with its shares falling by as much as 10%. The company anticipates significantly higher capital expenditures in the coming year as it intensifies its AI investments and recruitment of top talent. Despite a net income of $2.7 billion in the third quarter, Meta incurred a substantial $16 billion hit related to regulatory matters. Having entered the AI race later, Meta has now committed heavily to the technology, aiming for "superintelligence." The company continues to leverage its vast user base, projecting fourth-quarter revenues of up to $59 billion.