Investing in AI has two different feelings! Technology giants come under pressure, share prices fall, banks, pharmaceutical companies increase profits and reduce costs

S&P Global Ratings recently lowered its credit rating outlook for Meta (the parent company of Facebook) from "stable" to "negative" due to the surge in artificial intelligence (AI) capital expenditures and significant uncertainty in free cash flow. Although many major technology companies, including Meta and Google, have recently increased their cash consumption significantly due to their expansion of AI infrastructure spending, causing investors to worry that they will not be able to generate sufficient returns, causing their stock prices to plummet, many non-tech companies have stated that their investments in AI have begun to yield returns.

Meta's free cash flow in the third quarter was negative US$2.12 billion (NT$68.85 billion), and it estimates that full-year capital expenditures will be between US$135 billion and US$145 billion (NT$4.4 trillion and NT$4.7 trillion). Meta also plans to raise US$97.5 billion (NT$3.2 trillion) through a public market offering of shares to support investment in AI infrastructure.

S&P Global pointed out that compared with peers, Meta's ability to convert AI investments into revenue is more limited. High expenditures may cause Meta's free cash flow to continue to be negative after 2028. It also expects Meta to rely entirely on debt to fill the cash gap in 2028, so it lowered Meta's credit rating outlook from "stable" to "negative."

Since hitting a record high of US$777.59 (NT$25,254.6) on September 24, Meta's stock price has fallen back 20.9% so far, falling into a "technical" bear market.

CNBC reported that although investors are worried that major technology companies may have difficulty recouping the huge expenditures on AI, companies including Spanish financial giants Santander, Novartis Pharmaceuticals and Standard Chartered Bank have stated that AI is beginning to increase their revenue and profits and reduce costs.

Santander said its AI program created business value of 194 million euros (NT$7.03 billion) in the first nine months of this year. Jose G. Cantera, the bank’s chief financial officer, said AI is helping the bank reduce low-value work so employees can focus on high-value work.

Novartis CEO Vas Narasimhan said AI is starting to contribute to the company's bottom line. Novartis' core operating profit in the third quarter was US$6.04 billion (NT$196.17 billion), an annual increase of 10% at constant exchange rates. The company did not quantify how much was attributed to AI, but Narasimhan pointed out: "This is the first quarter that I really see AI starting to really improve our financial report."

Standard Chartered Bank's third-quarter operating profit increased by 14% year-on-year at constant exchange rates. Manus Costello, the bank's chief financial officer, said that AI is helping the bank build better relationships with customers and generate more revenue.