The largest technology companies increased their profits by 17% thanks to investments in AI

Microsoft, Amazon, Apple, Meta and Google’s parent company Alphabet are watching with eager investor eyes. Even after increasing profits by 17% year-on-year in their September presentations – from 172,013 million to 201,855, although in the case of Apple and Microsoft with longer analysis periods than their competitors, big tech They have a lot of Wall Street capital. waiting for signs Artificial intelligence (AI) is expected to have a huge impact on the reporting of the five major technology companies. All five reported results this week, although still needs to be added Nvidia has scheduled a results presentation for later this month.

In response to doubts Big tech companies have doubled down. The capital expenditures of the four largest Internet and software companies – Amazon, Microsoft, Meta and Alphabet – will significantly exceed $200 billion this yearan amount that breaks all records.

This week, the top managers of these companies warned that pharaonic displayMoreover, next year it will not only slow down, but also increase. Additionally, they briefly spoke about the benefits they are getting from their unbridled pursuit of generative artificial intelligence, arguing that this technology improving productivity of core services and helps keep operating costs low.

This avalanche highlights the enormous costs and resources consumed by the global growth of AI, fueled by the emergence of ChatGPT. Tech giants are rushing to acquire the scarce high-performance chips they need to process the information they receive. demand this technology; and build the huge data centers they need. That is why these companies are entering into more and more contracts with energy suppliers to supply electricity to their facilities with high electricity consumption 24 hours a day, which has even led to Microsoft to reactivate nuclear power plant in the USA.

With this placement, investors want to see results. Large firm prices have been punished throughout this week as earnings growth forecasts There were about 19%.figures that, although much higher than the 4.3% increase expected for S&P500 companies; represent its increase more content in six quartersBloomberg reports this.

Waiting for signs

One sign that demand for generative artificial intelligence is beginning to grow is the growth rate of the cloud divisions of Microsoft and Google. Nevertheless, optimism has dissipated when the firm founded by Bill Gates warned that cloud growth would slow this quarter, largely due to supply constraints.

In turn, the cloud market leader Amazon Web Services did not live up to the most optimistic expectations regarding improving your own growth.

At an analyst conference on Thursday, Amazon CEO Andy Jassy called AI an “extraordinarily large, perhaps unique opportunity,” as evidenced by his company’s forecast of record spending $75 billion by 2024.

A day earlier, Mark Zuckerberg, CEO of Meta, pledged to increase investment in linguistic artificial intelligence models and other futuristic projects that he considers important to his company’s future, according to the US financial agency. Meta’s capital costs may amount to $40 billion this year. For his part, Alphabet CFO Anat Ashkenazi predicted an increase.”significant” in this capital investments by 2025.

Green shoots and shadows

It was Alphabet that announced that the new generative AI functions of its search engine increase participation and promotion of use. Despite this, Google’s search volume growth slowed compared to the previous quarter, which is a cause for concern. The question is how strong the AI ​​effect was.

However, Microsoft said its AI revenues are about to reach $10 billion annuallywhich is a step faster than any other business in its history.

For its part, Apple gave cautious forecasts for the crucial Christmas quarter, given uncertainty about how the rollout of new artificial intelligence features will affect the future. sale of iPhones and other devices challenging quarterly results that would otherwise They would be strong.

In this context, the prices of large technology companies have undergone a downward correction, but this has not stopped them from reaching valuations above historical averages. Apple trades at 32x projected earnings for the next 12 months compared with an average of 20 times over the past decade, according to data compiled by Bloomberg. For my part, Microsoft trades at 33x.