Amazon, Google, Meta, and Microsoft are gearing up to make substantial investments in AI, with estimated capital expenditures reaching $300 billion next year. According to projections by Morgan Stanley, this figure is expected to surge even further in 2026.
Focus on Fixed Assets
The bulk of these capital expenditures will be directed towards fixed assets like data centers and real estate. These tech giants, often referred to as hyperscalers due to their expansive cloud networks, are embarking on an extensive investment cycle to capitalize on opportunities in generative AI and large language models, as highlighted in a recent note by Morgan Stanley.
Importance of Continued Disclosure
Morgan Stanley's analysts emphasized the significance of ongoing disclosure regarding the new and incremental adoption, engagement, and revenue prospects that each of these companies is pursuing through their investments. The soaring capex numbers underscore the critical nature of these initiatives.
Rising Demand for AI Services
The recent earnings reports from Big Tech underscored the significant demand for AI services, necessitating additional data centers, GPUs, networking equipment, energy resources, and infrastructure to support this technology. This escalating demand is driving unprecedented levels of investment, with Bernstein projecting that Big Tech could spend over $1 trillion on capex over the next five years.
Amazon Leads the Way
According to Morgan Stanley's latest estimates, Amazon is poised to witness the most substantial increase in future spending. The bank's analysts revised their capex forecast for Amazon by 22%, projecting expenditures of $96.4 billion in 2025. This uptick is primarily driven by increased acquisitions of GPUs and servers for its data centers.
In 2026, Amazon's capex is anticipated to surge even further to $105 billion, surpassing the investments of tech giants like Microsoft, Google, and Meta. Collectively, these four companies are projected to invest a staggering $336.5 billion in capex in 2026, according to the bank's forecast.
Amazon's Aggressive AI Investment Strategy
Amazon's CEO, Andy Jassy, affirmed the company's commitment to aggressively investing in AI during a recent earnings call. Jassy highlighted Amazon's track record of generating operating income and free cash flow to ensure a successful return on invested capital, expressing confidence in replicating this success with generative AI.
Jassy remarked, "It is a really unusually large, maybe once in a lifetime type of opportunity." Amazon remains steadfast in its pursuit of AI innovation and growth.
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Source: Business Insider
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By: ekim@businessinsider.com (Eugene Kim)
Title: Big Tech’s Massive AI Spending Spree: A Look Ahead
Sourced From: www.businessinsider.com/amazon-microsoft-google-meta-wild-spending-ai-infrastructure-cloud-2024-11
Published Date: Tue, 05 Nov 2024 19:58:59 +0000
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