Large technology companies, including Microsoft and Meta, are increasing their spending on the construction of data processing centers for artificial intelligence at a rapid pace to satisfy huge demand. However, Wall Street craves quick returns from invested billions.
Both Microsoft and Meta stated that their capital expenditures are rising due to investments in the field of artificial intelligence. In this context, Meta warned of a "significant acceleration" in spending on infrastructure related to artificial intelligence in the coming year.
Power limitations weaken the technological industry. Microchip manufacturers, including Nvidia's giant, are experiencing difficulties with ramping up production volumes, which complicates the scaling of cloud capabilities.
Despite the challenges, Meta and Microsoft noted that we are still at the very beginning of the cycle of artificial intelligence development and highlight the long-term potential of this sector. Investments remind us of times when large technology companies were developing cloud technologies, waiting for clients to adopt this technology.
Expanded capital expenditures could undercut the high margins of these companies, and the pressure on this indicator likely alarms investors. Shares of large technology companies fell in after-hours trading, highlighting problems they face, as they strive to find a balance between ambitious goals in the field of artificial intelligence and the need to satisfy investors, who are focused on short-term results.
Meta's shares fell 2.9% in after-hours trading, while Microsoft’s stock price dropped 3.6%, despite both companies exceeding profit expectations for July-September. Meta reported that for a single quarter, its spending is equivalent to what it spent in a year up to 2017. Microsoft reported that capital expenses increased by 5.3% to $20 billion in the first quarter of its financial year and predicted an increase in artificial intelligence spending in the second quarter.
