Microsoft, Meta, Google, Apple and Amazon updated Wall Street this week with quarterly financial results, and one common thread emerged: all plan to continue spending massive amounts on artificial intelligence (AI), the BBC reported. Investors are demanding more tangible results to show for the $1tn (£743bn) and growing external investment in computer chips, data centres and technical staff, and that mood sent some tech stocks tumbling around the globe.
Chatbots generate cost, not meaningful revenue
OpenAI's release of ChatGPT in late 2022 kicked off the ongoing AI investment race, and every major tech company has since launched its own consumer-facing chatbot, the BBC reported. Meta has Meta AI, Google has Gemini, Amazon has Rufus, and Apple relaunched Siri. Yet none of the chatbots or related tools clearly provides a meaningful amount of revenue, despite being costly to create.
According to the BBC, companies such as Alphabet-owned Google and Meta are currently spending much more money on AI tools than they bring in. Both companies reported some of their lowest-ever amounts of free cash flow — the money left over after paying for operations and investments.
| Company | Reported financial detail |
|---|---|
| Alphabet (Google) | $118bn revenue; free cash flow negative for the first time in its history as a public company |
| Meta | $61bn revenue; $784m free cash flow; Reality Labs lost nearly $9bn in the first half of the year |
| Microsoft | $190bn spent on AI over the last 12 months; plans to effectively match that figure this financial year |
| Amazon | Negative cash flow; plans to spend $220bn on AI this year |
Wall Street demands results, not roadmaps
Wall Street's reaction to Meta's quarterly results shows investors are no longer placated by executives' claims that AI investment will pay off at some unknown future point, the BBC reported. Meta's shares plunged to their second-lowest level in a year after chief executive Mark Zuckerberg said Meta was working on its own AI agent — a chatbot that can operate somewhat autonomously — and planning to develop an operation to sell an AI tool directly to other firms. Neither the operation nor the tool currently exists in a way that could make Meta money, and Zuckerberg gave no timeline. Meta nonetheless increased the low end of its planned AI spending and is likely to pour more than $140bn into AI this year alone.
Microsoft took the opposite path on the stock market. Its shares soared to a six-month high. Despite plans to effectively match this financial year the $190bn it spent on AI over the last 12 months, Microsoft showed strong revenue growth and more adoption of its core AI tool, the BBC reported.
Tracy Woo, an analyst with Forrester, said Microsoft was a tech company showing that its massive AI investments were "beginning to deliver returns."
Amazon's market reaction was almost identical to Microsoft's, according to the BBC. Despite negative cash flow and plans to spend $220bn on AI this year, the success of its other businesses drove its stock to its highest price in two months.
Demand for new tech remains strong
The BBC's third takeaway from the earnings cycle is that there is still huge demand for new tech. At the same time, AI tools have not yet proven to be a consumer technology revolution on the scale of the internet or even electricity, as many tech executives have promised for years, the BBC reported.
For enterprise technology decision-makers, the earnings disclosures put hard numbers on the gap between AI investment and AI returns: Alphabet's free cash flow turned negative on $118bn of revenue, Meta held just $784m of free cash flow on $61bn of revenue, and Meta's Reality Labs lost nearly $9bn in the first half of the year. The counter-example is Microsoft, whose stock hit a six-month high even as it plans to match its $190bn AI spending, because the company showed revenue growth and adoption of its core AI tool.
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