Sunday, December 22, 2024

Big Tech Makes Money by Spending on AI Infrastructure | PYMNTS.com

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Tech giants’ investments in cloud infrastructure are reportedly paying off due to the demand for artificial intelligence.

The momentum of cloud businesses began to slow in early 2022 as companies completed their migration to the cloud, but it has now picked up because companies need the infrastructure for AI, The Wall Street Journal reported Friday (Nov. 1).

Microsoft Chief Financial Officer Amy Hood said the demand exceeds the company’s capacity, according to the report.

The cloud businesses of Microsoft, Amazon and Google earned combined revenues of $62.9 billion last quarter, up 22.2% from a year earlier, the report said.

At the same time, they told investors that they must continue to spend on property and equipment to build more data centers, per the report.

Google parent Alphabet, Amazon and Microsoft spent a combined $50.6 billion on this infrastructure in the last quarter, up from $30.5 billion a year ago, according to the report.

While some question whether the demand for AI will continue growing enough to justify those investments, the companies’ most recent quarterly results showed that the cloud business is going strong, the report said.

All three companies are building AI products, but it’s the infrastructure that is delivering profits in the near term, per the report.

Other tech giants are also pouring resources into AI infrastructure, PYMNTS reported Thursday (Oct. 31).

Meta plans to spend up to $40 billion on this infrastructure in 2024, and its AI efforts are already showing promising results in terms of user engagement and advertising effectiveness.

Chip maker AMD reported record-breaking third-quarter revenue largely fueled by surging demand for AI-focused products, with the company’s Data Center segment being the star performer.

It was reported in September that OpenAI plans to bring together global investors to spend tens of billions of dollars on AI infrastructure in the United States.

The planned projects include data centers, turbines and generators, and semiconductor manufacturing.

In another measure of the demands placed upon infrastructure by companies’ use of AI, Goldman Sachs estimated that there will be a 160% increase in data center power consumption by 2030.

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