Feb 6 (Reuters) – U.S. tech giants are bracing for a surge in spending this year, largely fueled by investments in artificial intelligence, prompting increased scrutiny from investors questioning whether these substantial outlays will deliver sufficient returns to justify current valuations.
Alphabet, Microsoft, Amazon and Meta are collectively projected to invest more than $630 billion this year, with returns so far failing to keep pace with the escalating costs.
“Investors right now are not forgiving about large investments without clear signal on return on invested capital,” analysts at Morgan Stanley observed.
Below is a snapshot of how the companies performed in the December quarter:
CAPITAL EXPENDITURE
Amazon.com, previously considered behind in the AI development race, is now leading the way with $200 billion allocated to spending. Alphabet closely follows with up to $185 billion, while Meta has projected investments of up to $135 billion.
CLOUD REVENUE
Google Cloud experienced the most rapid growth among the three major U.S. cloud providers in the reported quarter, increasing by 48%.
Despite being smaller than its primary competitors, the strong adoption of the latest Gemini model has led some analysts to suggest that Alphabet has taken the lead in the AI arena. Amazon Web Services, the largest cloud provider, reported a revenue growth of 24%, while Microsoft’s Azure saw a 39% increase.
UNEVEN PROFIT
Rising expenses impacted profit growth at both Amazon and Meta during the quarter, while Microsoft reported its strongest profit growth in two years.
MARKET CAP GROWTH
Optimism surrounding Gemini and Google’s agreement to enhance Apple’s Siri have significantly boosted Alphabet’s share price, which has recently outperformed its rivals.
(Reporting by Harshita Mary Varghese and Anhata Rooprai in Bengaluru; Editing by Sriraj Kalluvila)
