Despite the rapid growth in their cloud services due to artificial intelligence investments, the shares of these companies witnessed a decline immediately after the announcement of profits that highlighted those same investments, because “profit margins are on everyone’s mind, and the immediate returns of such huge expenditures have become the subject of scrutiny.” According to a report by Forbes, viewed by the Sky News Arabia website.
The report draws attention to that artificial intelligence It’s here to stay and companies know it. With major technology companies’ spending on artificial intelligence expected to exceed $200 billion this year, pressure is on to justify these investments.
However, according to a Boston Consulting Group survey, 74 percent of companies are faltering when it comes to realizing and scaling value from AI initiatives. The core of the problem is related to challenges caused by human and procedural factors, including change management and workflow improvement.
In a related context, a report by the British newspaper “Financial Times” indicates that:
- Major American companies plan to spend more than $200 billion this year on artificial intelligence, amid concern on Wall Street about the expected returns from these enormous investments.
- Major American technology companies announced a few days ago – after announcing the results of the third quarter – about quick glimpses of the benefits achieved by their investments in generative artificial intelligence, stressing that this technology contributes to improving performance and reducing operational costs.
The newspaper quoted Jim Tierney, a growth equity investor at Alliance Bernstein, as concerned about the significant impact of this spending on profit margins by 2025.
Despite this, data on the rapid growth of cloud businesses at Microsoft and Google indicated the beginning of achieving returns from artificial intelligence, but Microsoft warned of a possible slowdown in cloud growth in this quarter due to supply constraints. Amazon’s cloud services were also unable to achieve optimal growth, despite surprisingly high profit margins.
For its part, Alphabet confirmed that the new features based on artificial intelligence in the search engine increase user interaction, while Microsoft stated that artificial intelligence revenues are about to reach $10 billion annually, thanks to its “Copilot” product, which is offered for a monthly fee. Despite these numbers, many other software companies do not disclose the impact of artificial intelligence on their revenues.
At the same time, Meta explained that artificial intelligence has boosted its advertising revenues and increased user interaction, while Amazon confirmed that its artificial intelligence department is witnessing growth exceeding 100 percent annually.
However, investors have been unable to ignore the rapid increase in spending on new data centers and AI equipment, leading many executives to defend these massive expenditures as keeping pace with growing demand.
Increased spending
For his part, technology expert, Mohammed Al-Harithi, explained in statements to the “Eqtisad Sky News Arabia” website that the prevailing state of anxiety on “Wall Street” regarding technology companies’ huge spending on artificial intelligence is due to several reasons, the most prominent of which is the excessive focus on this sector without regard to… Its broader effects on the market.
- Focusing spending solely on artificial intelligence creates great concerns. Because it may change the division of the global market, the standards of investment channels and the injection of profits.
- The technology sector now accounts for the largest proportion of investments, leaving other sectors lacking investors and financing, which affects the market balance.
Al Harithi also pointed out that the growth of technologies based on artificial intelligence has direct effects on the idea of financial trading and the proportions of investments in various sectors.
- There are potential imbalances that may affect global stock exchanges and stock trading, because reliance on artificial intelligence in making investment and financial decisions has become common.
- This acceleration in reliance on technology is not compatible with current financial studies and legislation, which threatens the balance in the global financial entity.
Al Harithi concluded his speech by emphasizing that the development of artificial intelligence technologies is proceeding much faster than studying their negative and positive effects, which makes it necessary to be careful about expanding them and work to align legislation and financial standards with these changes to avoid disruptions in the global market.
Artificial intelligence has become the new battleground for the world’s largest technology companies, with Apple, Microsoft, Google, Amazon, and Meta in particular putting AI central to their strategies.
Collectively, these tech giants pumped in about $60 billion in the past quarter alone, primarily to support AI infrastructure.
This number represents an increase of 60 percent over last year, which reflects the unprecedented level of commitment to the future of artificial intelligence, according to a report by CNBC TV, which was reviewed by the Sky News Arabia website, indicating experts’ expectations that this number will rise. number, as companies look to enhance their AI capabilities in response to increasing demands and expectations.
A state of anxiety
In turn, the Managing Director of ADT Consulting and Technology Systems, Mohamed Saeed, said in a statement to the “Eqtisad Sky News Arabia” website that there is a state of concern among investors on Wall Street about artificial intelligence, especially among investors who tend to invest in the short term.
Saeed explained that the concern stems from the large volume of potential spending on artificial intelligence, which exceeds $200 billion by the giants of the sector, and is expected to rise by 35 percent annually, which means that spending may soon reach a trillion dollars.
He pointed out that this huge spending raises questions about the returns that companies achieve from these investments, which are still weak compared to expectations. Artificial intelligence is still in its early stages, and the market is not mature enough to achieve returns commensurate with these expenses.
Saeed added: The intense competition between companies in this field increases the volume of spending and puts pressure on returns. The market is witnessing a constant race to develop new language models, where one company takes the lead for a short period before another company takes its place with a new innovation.
He also pointed out that the time frame for achieving returns on investment in artificial intelligence may be longer than the patience of some investors, which increases their state of stress. However, Saeed stressed that the expected returns in the long term will be very satisfactory, as these returns can significantly exceed the size of investments.
On the other hand, he explained that companies use artificial intelligence as a means to reduce operational expenses and increase the efficiency of operations. Artificial intelligence provides more accurate, fast and sustainable solutions compared to the human factor, which saves costs and provides long-term added value.
