Meta's stock tumbled 7% in extended trading on Wednesday after the company revealed it would increase spending on artificial intelligence (AI) projects, fueling investor anxiety over the massive costs associated with the technology. The company, which owns Facebook and Instagram, said its planned capital expenditure would rise to as much as $145 billion, up from a previous maximum of $135 billion.
Meta reported its quarterly earnings alongside Google-owner Alphabet, Microsoft, and Amazon, but investors punished Meta while the other three fared better. Alphabet's shares rose in after-hours trading after executives outlined tangible business results from AI spending, including a 63% growth in its cloud business. Microsoft's stock initially fell but recovered, as the company highlighted its AI business reaching a $37 billion annual run rate. Amazon's shares edged up 3% despite a cautious outlook, with its cloud business growing 28%.
Lee Sustar, an analyst at Forrester, noted ongoing anxiety "about the sustainability of the AI boom" given the high costs and uncertain returns. Yet tech companies continue to pour billions into development, betting on future leadership in AI.
During Meta's investor call, CEO Mark Zuckerberg acknowledged the lack of a precise plan for scaling products but expressed confidence in the company's AI lab. CFO Susan Li admitted Meta had "underestimated our compute needs" in prior years. Zuckerberg also hinted at potential job cuts, saying AI allows small teams to accomplish tasks that previously required dozens of people, and Li added that the company's future size is uncertain.
In contrast, Alphabet's CEO Sundar Pichai emphasized the company's control over frontier models and silicon, noting strong demand for AI-powered cloud services. Microsoft's CFO Amy Hood reassured investors that AI business margins are better than during the early cloud transition. Amazon's CEO Andy Jassy highlighted the $20 billion annual run rate for its custom AI chips and partnerships with major AI providers like Anthropic and OpenAI.
The combined AI spending by the four tech giants is expected to exceed $650 billion this year, raising questions about whether investments will yield sufficient returns.