In recent earnings calls, major tech companies reassured investors that their significant investments in artificial intelligence (AI) will yield positive results. Despite Wall Street's concerns about the rising costs of high-end chips and data centers, Google, Microsoft, and Meta emphasized their financial solid foundations and ongoing profitability.
Over the past month, Wall Street questioned when these AI investments would translate into revenue and profit growth. The tech giants responded by highlighting their continued success:
- Google (Alphabet) reported a $24 billion net profit on $85 billion in revenue.
- Microsoft announced a $22 billion net profit on $65 billion in revenue.
- Meta reported a $13.5 billion net profit on $39 billion in revenue.
Apple and Amazon, although not as deeply involved in foundational AI models, also posted impressive earnings:
- Apple reported a net profit of $21 billion and $86 billion in revenue.
- Amazon announced a $13.5 billion net profit on $148 billion in revenue.
These figures underscore the substantial profitability of these companies, even in a single quarter.
With such robust profits, shareholders might push for higher dividend payouts. However, most investors are content to let CEOs reinvest profits into future innovations, particularly AI. Wall Street's current high valuations of these companies reflect their long-term potential. AI could reshape the tech landscape as it continues to evolve, potentially creating new leaders. CEOs want to reassure investors that their companies are well-positioned for this future.
Meta CEO Mark Zuckerberg emphasized that AI will enhance almost every existing product and enable many new ones. Microsoft CEO Satya Nadella highlighted the company's focus on customer demand signals, such as the massive growth in using Github Copilot. Google CEO Sundar Pichai stressed the importance of investing heavily in AI to avoid the greater risk of underinvesting.
The tech giants are confident that their AI investments will secure their positions as leaders in the next wave of technological advancement. As Pichai said, "The risk of underinvesting is dramatically greater than the risk of overinvesting."