Tech giants are pouring money into A.I. as they cut costs elsewhere
Google launched Bard AI, it’s own chatbot to rival Microsoft and OpenAI’s ChatGPT.
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Tech investors are eager to hear how much industry leaders are bolstering profitability now that they’re in cost-cutting mode.
But there’s one area where they also want to see hefty investments: artificial intelligence.
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Alphabet, Microsoft, Amazon and Meta all reported quarterly results this week, updating Wall Street on their efforts to improve efficiency as economic concerns mount. When it comes to AI and the latest boom in so-called large language models (LLMs) that power products like ChatGPT, the mega-cap tech companies can’t afford to get left behind.
Generative AI programs use increasing amounts of data and processing power to produce outputs that seem like they were made by a human — a block of text, a snippet of code, or a computer-generated image. They require specialized supercomputers that aren’t cheap.
On their earnings calls this week, tech CEOs talked at length about the potential for AI, whether they’re building their own models or rapidly integrating it into products. The common theme was their emphasis on the large sums of money they’ll be spending to build and run these applications.
Here’s what executives from Alphabet, Microsoft, Amazon and Meta told analysts:
Alphabet
Sundar Pichai, chief executive officer of Alphabet Inc.
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Sundar Pichai, Alphabet’s CEO, is under intense pressure to deliver AI products due to the perceived threat that the company’s core Google search engine faces from the sophisticated chatbots hitting the market. The company recently declared an internal “code red.”
Pichai said on Tuesday’s earnings call that the company was making “good progress” towards its AI goals.
“We’ll continue to incorporate generative AI advances to make search better in a thoughtful and deliberate way,” Pichai said.
He said Google is using AI to improve the conversion rate of ads and reduce the amount of “toxic text” that goes into AI models. The company is also combining two primary AI teams, Brain and DeepMind.
Pichai said that in addition to using its own homegrown chips to power its models, it’s using processors from Nvidia, which makes the vast majority of graphics chips used to train and deploy cutting-edge AI.
Microsoft
Microsoft CEO Satya Nadella speaks during an interview in Redmond, Washington, on March 15, 2023.
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Microsoft is using OpenAI’s GPT technology in its Bing search engine, Office, and Teams teleconferencing system.
CEO Satya Nadella says that AI will eventually drive revenue growth and is already sparking increased uptake in the company’s apps. Bing, for example, has seen downloads quadruple since Microsoft added a chatbot, he said. Microsoft has generated over 200 million images through its Bing integration.
Nadella warned that a significant amount of capital will be required to build out the massive datacenters needed to run AI applications.
“We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation,” Nadella said. “And we expect the resulting revenue to grow over time.”
Amazon
Andy Jassy on stage at the 2022 New York Times DealBook on November 30, 2022 in New York City.
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Amazon CEO Andy Jassy gave an unusually lengthy response on Thursday to an analyst’s question about the company’s generative AI plans.
Jassy said Amazon is building its own LLMs, and designing data-center chips for machine learning, emphasizing that the market is massive.
“These large language models, generative AI capability, has been around for a while. But frankly, the models were not that compelling until about six to nine months ago,” Jassy said. “They have gotten so much bigger and so much better so much more quickly that it really presents a remarkable opportunity to transform virtually every customer experience that exists.”
Jassy also said Amazon’s size would allow it to become one of a handful of companies building LLMs, which can take hundreds of computers running for weeks, overseen by expensive machine learning engineers.
“There will be a small number of companies that want to invest that time and money and we will be one of them at Amazon,” Jassy said.
Unlike Microsoft and Google, Amazon’s focus is selling access to the technology through its Amazon Web Services division. However, Jassy said Amazon will work on some applications, such as programs to help engineers write code.
“Every single one of our businesses inside of Amazon are building on top of large language models to reinvent our customer experience,” Jassy said. That includes voice assistant Alexa, he said.
Meta
Mark Zuckerberg, co-founder and CEO of Meta Platforms, in July 2021.
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Meta CEO Mark Zuckerberg tried to dispel the notion that his company is no longer focused on the metaverse after turning his attention in that direction in late 2021.
But he wanted investors to know that Meta can invest in metaverse technologies while simultaneously putting tons of resources into AI, which he called a “key theme” for his company.
Zuckerberg said that while the company has used machine learning to deliver recommendations and power products like Facebook’s news feed or ad systems, a new main area of focus is generative foundation models.
“It’s been a pretty amazing year of progress on this front, and the work happening now is going to impact every single one of our apps and services,” Zuckerberg said.
He said the company would work on a variety of products using the technology, including chat experiences in WhatsApp and Facebook Messenger, tools for making images for posts on Facebook and Instagram, and eventually programs that could spit out entire videos from short descriptions.
A concept he’s particularly excited about is “AI agents,” which often refer to AI programs that can carry out goals.
“There’s an opportunity to introduce AI agents to billions of people in ways that will be useful and meaningful,” Zuckerberg said. One possibility for an AI agent would be to handle customer service for businesses, Meta has said.
Zuckerberg discussed the company’s big investments to build out its datacenters for AI applications. He said the technology was the “main driver” of Meta’s growth in capital expenditures over the past few years.
“At this point we are no longer behind in building out our AI infrastructure,” Zuckerberg said.
That doesn’t mean Meta is done buying graphics processors. Zuckerberg said the company would need to “continue investing,” but would do so after it launches its generative AI products and gets a better grasp on the resources required.
WATCH: Big beat for Amazon
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Apple is losing market share in China due to declining iPhone shipments, supply chain analyst Ming-Chi Kuo wrote in a report on Friday. The stock slid 2.4%.
“Apple has adopted a cautious stance when discussing 2025 iPhone production plans with key suppliers,” Kuo, an analyst at TF Securities, wrote in the post. He added that despite the expected launch of the new iPhone SE 4, shipments are expected to decline 6% year over year for the first half of 2025.
Kuo expects Apple’s market share to continue to slide, as two of the coming iPhones are so thin that they likely will only support eSIM, which the Chinese market currently does not promote.
“These two models could face shipping momentum challenges unless their design is modified,” he wrote.
Kuo wrote that in December, overall smartphone shipments in China were flat from a year earlier, but iPhone shipments dropped 10% to 12%.
There is also “no evidence” that Apple Intelligence, the company’s on-device artificial intelligence offering, is driving hardware upgrades or services revenue, according to Kuo. He wrote that the feature “has not boosted iPhone replacement demand,” according to a supply chain survey he conducted, and added that in his view, the feature’s appeal “has significantly declined compared to cloud-based AI services, which have advanced rapidly in subsequent months.”
Apple’s estimated iPhone shipments total about 220 million units for 2024 and between about 220 million and 225 million for this year, Kuo wrote. That is “below the market consensus of 240 million or more,” he wrote.
Apple did not immediately respond to CNBC’s request for comment.
New Tesla Model 3 vehicles on a truck at a logistics drop zone in Seattle, Washington, on Aug. 22, 2024.
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Tesla is voluntarily recalling about 239,000 of its electric vehicles in the U.S. to fix an issue that can cause its rearview cameras to fail, the company disclosed in filings posted Friday to the National Highway Traffic Safety Administration’s website.
“A rearview camera that does not display an image reduces the driver’s rear view, increasing the risk of a crash,” Tesla wrote in a letter to the regulator. The recall applies to Tesla’s 2024-2025 Model 3 and Model S sedans, and to its 2023-2025 Model X and Model Y SUVs.
The company also said in the acknowledgement letter that it has already “released an over-the-air (OTA) software update, free of charge” that can fix some of the vehicles’ camera issues.
In 2024, Tesla issued 16 recalls in the U.S. that applied to 5.14 million of its EVs, according to NHTSA data. The recall remedies included a mix of over-the-air software updates and parts replacements. More than 40% of last year’s recalls pertained to issues with the newest vehicle in the company’s lineup, the Cybertruck, an angular steel pickup that Tesla began delivering to customers in late 2023.
Regarding the latest recall, the company said it had received 887 warranty claims and dozens of field reports but told the NHTSA that it was not aware of any injurious, fatal or other collisions resulting from the rearview camera failures.
Other customers with vehicles that “experienced a circuit board failure or stress that may lead to a circuit board failure,” which cause the backup camera failures, can have their vehicles’ computers replaced by Tesla, free of charge, the company said.
Tesla did not immediately respond to CNBC’s request for comment.
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