FT: US tech giants to spend over $300 billion on AI

Big Tech’s enormous investment in artificial intelligence is set to persist without restraint in 2025, with Amazon leading the way by planning to invest over $100 billion in infrastructure this year, surpassing its competitors.

In 2024, the combined spending by the top four US tech giants had already surged by 63 per cent, reaching record-breaking levels. Now, executives are pledging to further accelerate their AI investments, brushing off concerns over the enormous amounts being committed to this emerging technology, Caliber.Az reports per Financial Times.

Microsoft, Alphabet, Amazon, and Meta reported a total capital expenditure of $246 billion in 2024, up from $151 billion the previous year. They anticipate spending could exceed $320 billion in 2025 as they race to develop data centers and equip them with specialized chips to stay ahead in AI large language model research. The scale of their spending ambitions, revealed alongside their fourth-quarter earnings, has caught the market off guard, exacerbating a sell-off triggered by the release of an innovative, cost-effective AI model by Chinese startup DeepSeek in late January.

Following the announcement of weaker-than-expected growth in their cloud computing divisions and a sharp increase in capital expenditure, Microsoft and Alphabet saw a combined $200 billion wiped off their market value. Google’s 8 per cent drop marked its fifth-worst trading day in the last 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 “The unbridled enthusiasm across the entire ‘Magnificent Seven’ has been replaced by pockets of scepticism and created some ‘show me’ situations,” said Jim Tierney, head of the concentrated US growth fund at AllianceBernstein.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 excitement surrounding AI's transformative potential, shareholders are concerned that ramping up spending without a proportional rise in revenue could deplete capital that would otherwise be allocated for buybacks and dividends, while also neglecting non-AI business segments. Google has been unclear about the usage and revenue generated from its Gemini chatbot, while companies have been hesitant to adopt Microsoft’s expensive and glitch-prone Copilot “agents” intended to enhance 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 exemplified concerns about AI's future. The Chinese AI lab's claim to have developed a reasoning model with capabilities similar to Google and OpenAI's products but at a fraction of the cost — and without using Nvidia's advanced graphic processing units — sent Nvidia's stock tumbling 17 per cent, wiping out $600 billion in value in a single day, from which it has only partially recovered.

However, Big Tech leaders have remained confident. Google’s Sundar Pichai defended his plan to invest $75 billion in 2025 — a 42 per cent increase from the previous year's $53 billion — stating that the AI opportunity was "as big as it comes," and that the company was investing to seize it. He argued that DeepSeek's model would drive demand by showcasing how new techniques could lower costs and open up new research avenues. Microsoft’s Satya Nadella echoed this sentiment at Davos two weeks ago, stating, “I am going to spend $80 billion building out Azure, customers can count on Microsoft." 

By Naila Huseynova