Massive spending on artificial intelligence (AI) development by the\nworld\u2019s tech giants is now being questioned by investors. After three\nyears of pouring hundreds of billions of dollars into the technology,\nthe market is demanding certainty on whether these enormous investments\nwill truly generate profits.<\/p>\n
The quarterly financial reports of Alphabet, Microsoft, Meta, and\nAmazon, released on Wednesday US time, represent a crucial moment. The\nresults will indicate whether the substantial AI expenditures can drive\ngrowth in cloud business and digital advertising to justify the costs\nincurred.<\/p>\n
These four companies are estimated to spend around US$600 billion, or\nmore than Rp 10,000 trillion, on AI development this year.<\/p>\n
This historic spending is squeezing cash flows and testing the\npatience of Wall Street investors, although share prices remain\nresilient due to expectations of long-term gains.<\/p>\n
The impacts of this AI splurge are beginning to show. Amazon and\nMeta, the parent of Instagram, have announced layoffs affecting\nthousands of employees. Microsoft has even launched its first employee\nbuyout programme in over 50 years.<\/p>\n
\u201cWhat investors, including us, are looking for is the return on all\nthis capital expenditure (capex),\u201d said Joe Maginot, portfolio manager\nfor large-cap equities at Madison Investments, quoted from Reuters on\nWednesday (29\/4\/2026).<\/p>\n
\u201cClearly, this will take time, but this is a business that previously\ngenerated substantial free cash flow, and today almost all operating\ncash flow is absorbed by capex. So, the business economics are\nchanging,\u201d he added.<\/p>\n
This shift is reflected in the cloud business, which is the backbone\nof AI monetisation. For the January-March quarter, growth is expected to\nincrease modestly: Amazon Web Services at 25%, Microsoft Azure at 40%,\nand Google Cloud at 50.1%.<\/p>\n
Overall, revenue for the major tech companies remains solid.\nAlphabet\u2019s sales are projected to rise 18.7% to US$107.06 billion.\nAmazon is forecast to grow 13.9% to US$177.30 billion, while Microsoft\nis expected to increase 16.2% to US$81.39 billion.<\/p>\n
Meta is anticipated to record the largest revenue surge, at 31% to\nUS$55.45 billion. This fastest growth in over four years is driven by\nimprovements in AI-based advertising effectiveness and the company\u2019s\nposition in the digital market.<\/p>\n
The main spotlight is on Microsoft. The company\u2019s shares have lagged\nbehind competitors and recorded its worst quarterly performance since\nthe 2008 financial crisis.<\/p>\n
Investors are also beginning to doubt Microsoft\u2019s ability to monetise\nCopilot. From more than 450 million enterprise customers, only 3.3%\nsubscribe to the AI assistant at US$30 per month.<\/p>\n
At the same time, AI models from Microsoft\u2019s partners like Anthropic\ncould replace traditional software that has long been the company\u2019s main\nrevenue source. Microsoft is attempting to turn this threat into an\nopportunity by integrating rival AI models into its ecosystem.<\/p>\n
Meanwhile, Microsoft\u2019s partnership with OpenAI is no longer\nexclusive. Although the company will receive 20% of OpenAI\u2019s revenue\nuntil 2030, OpenAI is now free to collaborate with competing cloud\nproviders like Amazon.<\/p>\n
\u201cCompanies must explain why their business models will not be\nsignificantly disrupted by AI and why their investments and\nrelationships with OpenAI will keep them competitive,\u201d said Melissa\nOtto, head of research at S&P Global Visible Alpha.<\/p>\n
\u201cNadella must answer that,\u201d she added.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/mega-ai-projects-devour-rp-10-000-trillion-investors-demand-results-1777463590", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }