Rising artificial intelligence (AI) cost projections by Alphabet Inc. (GOOG) and Microsoft Corp (MSFT) have raised the eyebrows of investors, shackling the Nasdaq’s performance on 31 January. This tech-loaded index ended Wednesday’s trading at 2.23% in the red.
Rising AI costs a stumbling block for big tech stock performance
Alphabet stocks took a 7.35% knock after publishing its leaner-than-expected festive advertising sales figures on Tuesday, 30 January. The tech giant also indicated that more money will go into boosting its AI leverage by investing in upscaled servers, for example.
Alphabet CEO Sundar Pichai tried to bolster investor confidence by saying:
We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come.
On the same day, Microsoft stocks hit a negative 0.2% bump. As with its Alphabet competitor, analysts attributed this to a focus on more AI spending in the company’s 2023 annual financial report.
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Microsoft Chairman and CEO Satya Nadella commented: “We will invest to accelerate our lead in AI by infusing this technology across every layer of the tech stack. And, finally, we will continue to drive operating leverage, aligning our cost structure with our revenue growth.”
When AI hit the ground running, tech giants had investors on the edge of their seats with promises of significant sales boosts. In the wake of rising AI costs, investors are questioning the feasibility of these decisions.
All eyes are now on Thursday, 1 February, when Apple Inc. (AAPL), Meta Platforms, Inc. (META) and Amazon.com, Inc. (AMZN) will deliver their financials.
