Tech execs are telling investors they have to spend money to make money on AI

It
was
a
big
week
for
tech
earnings,
with


Microsoft,

Meta,


Alphabet, Amazon
and Apple
all
reporting
over
the
past
few
days.
Artificial
intelligence
was
on
everyone’s
lips.

One
theme
investors
heard
repeatedly
from
top
execs
is
that,
when
it
comes
to
AI,
they
have
to
spend
money
to
make
money.

“We
move
from
talking
about
AI
to
applying
AI
at
scale,”
Microsoft
CEO

Satya
Nadella
said
on
his
company’s
earnings
call
on
Tuesday.
“By
infusing
AI
across
every
layer
of
our
tech
stack,
we
are
winning
new
customers
and
helping
drive
new
benefits
and
productivity
gains.”

Last
year
marked
the
beginning
of
the
generative
AI
boom,
as
companies
raced
to
embed
increasingly
sophisticated
chatbots
and
assistants
across
key
products.


Nvidia
was
the
big
moneymaker.
Its
graphics
processing
units,
or
GPUs,
are
at
the
heart
of
the
large
language
models
created
by
OpenAI,
Alphabet,
Meta
and
a
growing
crop
of
heavily
funded
startups
all
battling
for
a
slice
of
the
generative
AI
pie.

As
2024
gets
rolling
and
executives
outline
their
plans
for
ongoing
investment
in
AI,
they’re
more
clearly
spelling
out
their
strategies
to
investors.
One
key
priority
area,
based
on
the
latest
earnings
calls,
is
AI
models-as-a-service,
or
large
AI
models
that
clients
can
use
and
customize
according
to
their
needs.
Another
is
investing
in
AI
“agents,”
a
term
often
used
to
describe
tools
ranging
from
chatbots
to
coding
assistants
and
other
productivity
tools.

Overall,
executives
drove
home
the
notion
that
AI
is
no
longer
just
a
toy
or
a
concept
for
the
research
labs.
It’s
here
for
real.

At
the
biggest
companies,
two
huge
areas
for
investment
are
AI
initiatives
and
the
cloud
infrastructure
needed
to
support
massive
workloads.
To
get
there,
cost
cuts
will
continue
happening
in
other
areas,
a

message
that’s
become
familiar
in
recent
quarters.

Meta
CEO

Mark
Zuckerberg
on
Thursday
emphasized
the
company’s
continued
AI
efforts
alongside

broader
cost
cuts.

“2023
was
our
‘year
of
efficiency’
which
focused
on
making
Meta
a
stronger
technology
company
and
improving
our
business
to
give
us
the
stability
to
deliver
our
ambitious
long-term
vision
for
AI
and
the
metaverse,”
Zuckerberg
said
on
the
earnings
call.

Nadella
told
investors
that
Microsoft
is
committed
to
scaling
AI
investment
and
cloud
efforts,
even
if
it
means
looking
closely
at
expenses
in
other
departments,
with
“disciplined
cost
management
across
every
team.”

Microsoft
CFO
Amy
Hood
underlined
the
“consistency
of
repivoting
our
workforce
toward
the
AI-first
work
we’re
doing
without
adding
material
number
of
people
to
the
workforce,”
and
said
the
company
will
continue
to
prioritize
investing
in
AI
as
“the
thing
that’s
going
to
shape
the
next
decade.”

The
theme
was
similar
at
Alphabet,
where

Sundar
Pichai
spoke
of
his
company’s
“focus
and
discipline”
as
it
prioritizes
scaling
up
AI
for
Search,
YouTube,
Google
Cloud
and
beyond.
He
said
investing
in
infrastructure
such
as
data
centers
is
“key
to
realizing
our
big
AI
ambitions,”
adding
that
the
company
had
cut
nonpriority
projects
and
invested
in
automating
certain
processes.

“We
continue
to
invest
responsibly
in
our
data
centers
and
compute
to
support
this
new
wave
of
growth
in
AI-powered
services
for
us
and
for
our
customers,”
Pichai
said.
“You’ve
heard
me
talk
about
our
efforts
to
durably
reengineer
our
cost
base
and
to
improve
our
velocity
and
efficiency.
That
work
continues.”

Within
Google
Cloud,
Pichai
said
the
company
would
cut
expenses
by
reallocating
resources
to
the
most
important
projects,
slowing
the
pace
of
hiring,
improving
technical
infrastructure
and
using
AI
to
streamline
processes
across
Alphabet.
Capital
expenditures,
which
totaled
$11
billion
in
the
fourth
quarter,
were
largely
due
to
investment
in
infrastructure,
servers
and
data
centers,
he
said.

Ruth
Porat,
Alphabet’s
finance
chief,
reiterated
that
the
company
expects
full-year
capital
expenditures
for
2024
to
be
“notably
larger
than
2023,”
as
it
continues
to
invest
heavily
in
AI
and
the
“long-term
opportunity”
that
AI
applications
inside
DeepMind,
Cloud
and
other
systems
offer.

Amazon
CEO
Andy
Jassy
said
on
this
week’s
earnings
call
that
generative
AI
“will
ultimately
drive
tens
of
billions
of
dollars
of
revenue
for
Amazon
over
the
next
several
years.”

AI
will
continue
to
be
a
heavy
investment
area
for
the
company,
driving
an
increase
in
capital
expenditures
this
year
as
Amazon
pours
more
money
into
LLMs,
other
generative
AI
projects,
and
the
necessary
infrastructure.
Jassy
emphasized
Amazon’s
AI
chip
efforts,
naming
customers
such
as
Anthropic,


Airbnb,
Hugging
Face,
Qualtrics
and


Snap.

Apple
CEO

Tim
Cook
pointed
to
generative
AI
as
a
significant
investment
area
for
his
company,

teasing
an
announcement
later
this
year.

“As
we
look
ahead,
we
will
continue
to
invest
in
these
and
other
technologies
that
will
shape
the
future,”
Cook
said
during
a
call
with
analysts.
“That
includes
artificial
intelligence
where
we
continue
to
spend
a
tremendous
amount
of
time
and
effort,
and
we’re
excited
to
share
the
details
of
our
ongoing
work
in
that
space
later
this
year.”

Cook
added,
“Let
me
just
say
that
I
think
there’s
a
huge
opportunity
for
Apple
with
Gen
AI
and
AI,
without
getting
into
more
details
and
getting
out
in
front
of
myself.”

While
investors
want
to
see
investments
in
AI
by
the
companies
that
are
key
to
providing
the
infrastructure,
they
also
want
to
see
where
and
how
money
is
being
made.

Jassy
said
enterprise
clients
are
looking
to
use
existing
models
that
they
can
personalize
and
build
on,
pointing
to
Amazon’s
Bedrock
as
a
key
focus.

“What
we
see
is
that
customers
want
choice,”
Jassy
said.
“They
don’t
want
just
one
model
to
rule
the
world.
They
want
different
models
for
different
applications.
And
they
want
to
experiment
with
all
different-sized
models
because
they
yield
different
cost
structures
and
different
latency
characteristics.”

Nadella
pointed
to
Microsoft
Azure
as
a
predominant
“model
as
a
service”
offering,
emphasizing
that
customers
don’t
have
to
manage
underlying
infrastructure
yet
have
access
to
a
range
of
large
and
small
language
models,
including
some
from
Cohere,
Meta
and
Mistral,
as
well
as
open-source
options.
One-third
of
Azure
AI’s
53,000
customers
joined
within
the
past
12
months,
Nadella
said.

Alphabet
executives
highlighted
Vertex
AI,
a
Google
product
that
offers
more
than
130
generative
AI
models
for
use
by
developers
and
enterprise
clients
such
as
Samsung
and
Shutterstock.

Chatter
wasn’t
limited
to
LLMs
and
chatbots.
Many
tech
execs
talked
about
the
importance
of
AI
agents,
or
AI-powered
productivity
tools
for
completing
tasks.

Eventually,
AI
agents
could
potentially
take
the
form
of
scheduling
a
group
hangout
by
scanning
everyone’s
calendar
to
make
sure
there
are
no
conflicts,
booking
travel
and
activities,
buying
presents
for
loved
ones
or
doing
a
specific
job
function
such
as
outbound
sales.
Currently,
though,
the
tools
are
largely
limited
to
tasks
like
summarizing,
generating
to-do
lists
or
helping
write
code.

Nadella
is
bullish
on
AI
agents,
pointing
to
Microsoft’s
Copilot
assistant
as
an
example
of
an
“evolved”
AI
application
in
terms
of
productivity
benefits
and
a
successful
business
model.

“You
are
going
to
start
seeing
people
think
of
these
tools
as
productivity
enhancers,”
Nadella
said.
“I
do
see
this
as
a
new
vector
for
us
in
what
I’ll
call
the
next
phase
of
knowledge
work
and
frontline
work,
even
in
their
productivity
and
how
we
participate.”

Just
before
Amazon’s
earnings
hit,
the
company
announced
Rufus,
a
generative
AI-powered
shopping
assistant
trained
on
the
company’s
product
catalog,
customer
reviews,
user
Q&A
pages
and
the
broader
web.

“The
question
about
how
we’re
thinking
about
Gen
AI
in
our
consumer
businesses:
We’re
building
dozens
of
generative
AI
applications
across
the
company,”
Jassy
said
on
the
call.
“Every
business
that
we
have
has
multiple
generative
AI
applications
that
we
are
building.
And
they’re
all
in
different
stages,
many
of
which
have
launched
and
others
of
which
are
in
development.”

Meta
will
also
be
focused,
in
part,
on
building
a
useful
AI
agent,
Zuckerberg
said
on
his
company’s
call.

“Moving
forward,
a
major
goal
will
be
building
the
most
popular
and
most
advanced
AI
products
and
services,”
Zuckerberg
said.
“And
if
we
succeed,
everyone
who
uses
our
services
will
have
a
world-class
AI
assistant
to
help
get
things
done.”

Alphabet
executives
touted
Google’s
Duet
AI,
or
“packaged
AI
agents”
for
Google
Workspace
and
Google
Cloud,
designed
to
boost
productivity
and
complete
simple
tasks.
Within
Google
Cloud,
Duet
AI
assists
software
developers
at
companies
like


Wayfair
and


GE,
and
cybersecurity
analysts
at


Spotify
and


Pfizer,
Pichai
said.
He
added
that
Duet
AI
will
soon
incorporate
Gemini,
Alphabet’s
LLM
that
powers
its
Bard
chatbot.

Pichai
wants
to
offer
an
AI
agent
that
can
complete
more
and
more
tasks
on
a
user’s
behalf,
including
within
Google
Search,
though
he
said
there
is
“a
lot
of
execution
ahead.”

“We
will
again
use
generative
AI
there,
particularly
with
our
most
advanced
models
and
Bard,”
Pichai
said.
That
“allows
us
to
act
more
like
an
agent
over
time,
if
I
were
to
think
about
the
future
and
maybe
go
beyond
answers
and
follow-through
for
users
even
more.”

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