Tech Giants Report Mixed Results Amid AI Boom

The world’s biggest tech giants have reported their quarterly results, with mixed outcomes as concerns grow about an artificial intelligence bubble forming.

Microsoft’s AI Investment

Microsoft announced that its spending on AI infrastructure reached almost $35 billion in the three months to the end of September, a significant increase compared to the previous year. Although revenue rose 18% and net profit rose 12%, shares fell nearly 4% in after-hours trading as investors worried about the rising costs of sustaining the boom. Thanks to its stake in ChatGPT maker OpenAI, Microsoft is now a $4 trillion company.

Demand for AI Exceeds Capacity

Jonathan Neilson, vice president of investor relations at Microsoft, said: "We continue to see demand that exceeds the capacity we have available." The company’s investment strategy remains unchanged as it responds to the demand signal it sees. Big Tech is under increasing pressure to generate big returns on AI investments against a backdrop of rising valuations and limited evidence of productivity improvements.

Alphabet’s Impressive Results

In contrast, Alphabet, the parent company of Google, reported impressive results that beat analysts’ expectations. Total revenue for the quarter was a staggering $102.35 billion, with the search giant’s advertising unit remaining robust despite growing competition. Alphabet has also expressed aggressive spending ambitions, but reassured investors with its results. The company is "preparing for long-term AI leadership," according to Hargreaves Lansdown senior equity analyst Matt Britzman.

Threats to Google’s Dominance

Concerns remain that Alphabet’s dominance in search could be eroded by AI startups. OpenAI recently unveiled a browser that aims to compete with Google Chrome. However, Britzman believes the company is well-positioned to mount a strong defense as a gatekeeper to the Internet. The current browser demo of ChatGPT is not seen as a significant threat, and Google appears to be preparing for the challenges ahead.

Meta’s Disappointing Results

Meta, the parent company of Facebook, Instagram, and WhatsApp, saw its shares plunge as much as 10% in after-hours trading. Mark Zuckerberg’s tech empire expects "significantly higher" capital spending next year as it increases its investment in AI and launches a recruiting campaign for top talent. Net profit was $2.7 billion in the third quarter, taking a stunning $16 billion hit due to Donald Trump’s Big Beautiful Bill. Meta was late to the AI party, but has now increased its focus on this fledgling technology and aims to achieve superintelligence.