In a race to dominate the evolving landscape of artificial intelligence (AI), technology giants Amazon, Microsoft and Alphabet (Google) are boosting up investment drive. These corporate giants are mainly focusing on strengthening their cloud computing capabilities. The outcome may fuel an AI revolution.
Over the past few years, a couple of these companies have increased their capital spending significantly. Their combined investment in Q3 or 2023 was $42 billion, which was a 20% surge compared to the same period in 2021 and a 10% rise from the previous quarter. Analysts are predicting that this spending will further increase in the coming year.
Key executives from these giants have revealed that a substantial portion of their capital investments is for generative AI systems. These AI systems demand substantial computing power and data-crunching capabilities. Amazon’s CEO, Andy Jassy, even predicts that generative AI will generate “tens of billions in revenues.”
The driving force behind these investments lies in the fight for supremacy in the cloud market, a pivotal sector that significantly contributes to Amazon’s overall profits. To remain competitive and retain their customer base, all three tech giants are keen on offering a suite of state-of-the-art AI tools and services. Furthermore, they intend to leverage this technology to enhance their core products, ensuring their relevance and market share.
According to Jeff Pearson, managing director at technology consultancy Slalom, these rivals “have to compete on generative AI or they’ll lose relevance and market share,” which means an enormous capital expenditure is inevitable for equipment like servers and data centers.
Bank of America analysts have projected that the collective cloud-related capital expenditures of Amazon, Alphabet, and Microsoft will experience an accelerated 22% growth next year, reaching a staggering $116 billion. This year’s forecast marks a significant shift from last year when there was no expected growth, and their combined investments had already surged by 20% from 2021 to reach $84 billion.