When Will AI Start Making Money? Wall Street Grows Impatient
When Will AI Start Making Money? Wall Street Grows Impatient
This tech earnings season, one big question dominates Wall Street: When will artificial intelligence start generating significant profits?
Eighteen months after ChatGPT ignited an AI race, tech giants have invested heavily in AI infrastructure, promising industry-wide transformation. However, the tangible products delivered—such as chatbots, AI coding, and customer service tools—seem trivial compared to the grand vision of an AI-driven revolution, and investors are starting to get impatient.
Big Spending, Little Return
Amazon’s recent earnings report highlighted the dilemma. Despite massive spending on AI, the results were underwhelming, contributing to a nearly 9% drop in stock value. Similarly, Intel’s stock plummeted 25% after announcing significant cost-cutting measures following extensive AI investments. This has raised concerns among investors about the actual value and returns of these hefty expenditures.
Despite the skepticism, major tech companies remain committed to their AI investments. Google, Microsoft, and Meta have all signaled plans to increase spending on AI infrastructure, anticipating future benefits. For instance, Meta expects full-year capital expenditures between $37 and $40 billion, while Microsoft plans to exceed its $56 billion capital expenditure from 2024.
The Long Road Ahead
Tech leaders argue that the true benefits of AI will take time to materialize. Microsoft’s CFO, Amy Hood, mentioned that their data center investments are geared towards supporting AI monetization over the next 15 years. Similarly, Meta’s CFO, Susan Li, acknowledged that returns from generative AI will come over a longer period, with meaningful revenue impacts not expected until after 2024.
This extended timeline is unsettling for many investors accustomed to more immediate returns. The debate over whether AI investments will eventually pay off is intensifying. Some analysts, like Goldman Sachs’ Jim Covello, question if AI technology can solve complex problems justifying such high costs.
Bottom Line
As tech giants continue to pour billions into AI, Wall Street investor patience is wearing thin. The pressure to scale back investments and allow revenue growth to catch up is mounting. If AI investments do not start showing significant returns soon, tech companies might face a strategic shift in their AI spending. The industry’s current level of investment is unsustainable without clearer paths to monetization and significant revenue gains.
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