(Reuters) For IT juggernauts like Microsoft (MSFT.O) and Alphabet (GOOGL.O), artificial intelligence is anticipated to yield significant returns in the future. But before profits start to affect the bottom line, anticipate further investments, the corporations said on Tuesday.
According to Microsoft, prices increased significantly when it constructed new data centers to enable AI, and they will continue to increase as it purchases processors from companies like Nvidia Corp (NVDA.O) to power those data centers.
According to experts, Microsoft is paying for AI in two ways: to power its own products, like the upcoming $30/month Copilot AI assistant, and to assist businesses looking to utilize its Azure cloud computing services to develop AI products.
The majority of the service’s income will start coming in during the second half of Microsoft’s fiscal year 2024, which ends on June 30.
According to Ben Bajarin, CEO and primary analyst of Creative Strategies, “they’re buying a bunch of H100s,” referring to Nvidia’s premier AI chips.
Because both of them are now being used by the great majority of the market to train (AI systems), you’ll probably see something similar with Amazon (AMZN.O), if not this quarter then the next.
Alphabet, however, managed to contain expenditures, although briefly. The second-quarter capex was less than anticipated, according to chief financial officer Ruth Porat, who will soon be president and chief investment officer. She attributed this to delays in data center development.
According to Microsoft executives, the service will begin bringing in the majority of its revenue in the second half of its fiscal year 2024, which ends on June 30.
Ben Bajarin, CEO and principal analyst of Creative Strategies, said of the H100, one of Nvidia’s top-of-the-line AI chips, “They’re buying a bunch of them.”
Because both of them are the clouds that the vast majority of the market is currently using for training (AI systems), you’re likely to see a similar thing with Amazon (AMZN.O), if not this quarter then the next.
Alphabet, on the other hand, kept costs low, albeit briefly. Data center construction delays, according to Ruth Porat, chief financial officer and incoming president and chief investment officer, are the reason second-quarter capex was less than anticipated.