In the eyes of Wall Street, they disappointed. Shares in Google owner Alphabet have fallen 6.1% since it reported last week. Microsoft has declined in the two days since its own results. Amazon — the latest to drop its earnings on Thursday — slid in premarket trading. Silicon Valley hailed 2024 as the year that companies would begin to deploy generative AI, the type of technology that can create text, images and videos from simple prompts. This mass adoption is meant to finally bring about meaningful profits from the likes of Google’s Gemini and Microsoft’s Copilot. The fact that those returns have yet to meaningfully materialize is stoking broader concerns about how worthwhile AI will really prove to be. The technology represents an enormous opportunity — and that opportunity continues to grow, said Daniel Morgan, a senior portfolio manager at Synovus Trust. “But unfortunately, so does the upfront investment.” Investors are left to wonder, he said: “Can these hyper-scalers capture enough incremental increase in profit growth from their investments?” A winning product would also do the trick, he added. It wasn’t all bad. The three tech titans reported a healthy pace of growth in their cloud-computing divisions, the most obvious business to benefit from generative AI as the technology requires copious amounts of computational resources to perform. Those gains weren’t enough though to appease investors who are growing increasingly impatient to see returns from quarter after quarter of heavy spending on data centers and other AI infrastructure. Amazon projected third-quarter operating income that fell shy of analysts’ estimates on Thursday. Chief Executive Officer Andy Jassy has been waging a cost-cutting campaign to free up resources to invest in AI. “It’s really a positive indicator when we step up capital expenditures,” Amazon Chief Financial Officer Brian Olsavsky said while working to assure investors and analysts on a call Thursday. The company’s capital expenditures totaled $30.5 billion, mostly in its AWS cloud unit, in the first half of the year. Jassy said the company has developed sophisticated algorithms to guide its investment decisions so that it builds enough capacity to meet demand without denting profits. He’s vowed the investments will be worth it to support what he and his team have called a multibillion-dollar revenue run rate business.
Full story : U.S. Big tech shares plunge after Amazon, Microsoft, Alphabet earnings disappointed investors.
