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AI Investments Set to Soar, Microsoft and Alphabet Reveal
Microsoft and Alphabet anticipate massive payoffs from their AI ventures, but initial investments are crucial.

Credits : REUTERS
Microsoft's soaring costs stem from expanding data centers and acquiring Nvidia's chips, while Alphabet leverages its custom Tensor Processor Unit (TPU) to curb expenses. Analysts predict AI services will yield substantial revenue, but patience is key.
Microsoft and Alphabet recently unveiled their grand plans for AI investments. While lucrative payoffs are on the horizon, both companies expect deeper financial commitments in the short term. Microsoft has been aggressively building data centers and buying Nvidia chips to power its AI services, aiming to generate significant revenue in fiscal 2024. On the other hand, Alphabet has managed to keep costs low by utilising its own custom chip, the Tensor Processor Unit (TPU), but may still rely on external chip providers. As these tech giants prepare to embrace the AI revolution, let's delve into the strategies behind their bold moves.
Microsoft's AI costs have been twofold: powering their own products like the upcoming $30-a-month Copilot AI assistant and supporting companies in creating AI products through their Azure cloud computing services. The company's capital expenditures have surged due to building new data centers and procuring Nvidia's flagship AI chips (H100s). The move towards H100s showcases their dedication to pushing the boundaries of AI capabilities.
In contrast, Alphabet has been prudent with its AI expenses.
Chief Financial Officer Ruth Porat mentioned that lower-than-expected second-quarter capital expenditures were due to data center construction delays. Though Google may have invested extensively in AI over the past decade, its efforts might not be immediately apparent to users and investors. However, the advantage lies in their custom-designed Tensor Processor Unit (TPU), which plays a significant role in reducing costs.
Despite Alphabet's cost-effectiveness, the company acknowledges that it may still need to purchase chips from external vendors, which could potentially impact their profits and growth. On the other hand, Microsoft, lacking its own custom silicon alternative, seems to be aggressively relying on Nvidia's chips to drive their AI infrastructure.
While both companies foresee an inflection point in their AI endeavors, Microsoft's investors are eager to witness greater progress. With substantial AI investments on the horizon, analysts believe that these tech giants are poised to reap massive rewards.
Microsoft's AI investments involve building data centers and acquiring Nvidia's H100 chips for AI operations.
Alphabet maintains lower AI costs, thanks to its custom-designed Tensor Processor Unit (TPU).
Google may still need to purchase chips from external suppliers, potentially impacting profitability and growth.
Both companies anticipate substantial revenue from AI services in the near future, but patience is required.
Microsoft investors are keen to see further advancements in their AI ventures.
Source : REUTERS