Big Tech AI Spending Sends Share Prices Volatile as Companies Plan Over $500 Billion Investment

The share prices of the biggest tech firms in the US swung up and down as investors considered their immense spending on artificial intelligence (AI). Facebook's owner Meta, Google's owner Alphabet, Microsoft, and Amazon all reported their business results for the first three months of this year at the same time on Wednesday. The companies collectively plan to spend more than half a trillion dollars on AI this year, with Meta and Amazon making mass job cuts to offset these costs. Meta's shares slumped over 5% in after hours trading, while Microsoft and Amazon were down 2% and 1.6% respectively, before recovering by the end of the day. Meanwhile, Alphabet's share price jumped by almost 6%. Lee Sustar, an analyst at Forrester, said there is still anxiety "about the sustainability of the AI boom" given the high cost and so far unrealised gains. Yet, tech companies are pushing forward with plans, for this year and next, to pour billions into its development. "With the potential payoff of AI leadership seemingly so high, the companies continue to make those bets, forcing investors and customers alike to assess how their interests are impacted," Sustar added. Meta's share price slumped after it said it would be spending even more on AI projects and infrastructure than it anticipated. The firm said its planned capital expenditure, the metric companies use to detail their spending on projects that have not yet turned into business growth, will increase to as much as $145bn (£108bn), up from a previous maximum of $135bn. Susan Li, Meta's chief financial officer, said Meta has in past years "underestimated our compute needs" and that it needed to spend more money in order to meet them. Asked how this spending would lead to results, Meta's chief executive Mark Zuckerberg said: "I don't think we have a very precise plan for exactly how each product is going to scale or anything like that." "But I think we have a sense of the shape of where these things should be... and I'm quite comfortable that the lab we're building is on track to be a leading lab in the world," he added, referring to Meta's Superintelligence Lab. "We are seeing more and more examples where one or two people are building something in a week that would have previously taken dozens of people months... We're building the next evolution of our company around these people," Zuckerberg said. Asked about the possibility of more layoffs, Li said: "We don't really know what the optimal size of the company will be in the future." In an investor call on Wednesday, executives said there were plans to "significantly increase" spending on AI next year. The company did not say exactly how much it will spend next year, but this year it plans to spend $185bn, more than double what it spent in 2025. "We own frontier models, we own the silicon [for chips], that really helps us stay head of the curve," he said. The company said its profits rose by 30% and noted that its Google Cloud business grew by 63%, an increase it attributed specifically to an increase in AI usage by companies that buy cloud services. "Looking ahead, our ability to invest in this moment and stay at the frontier puts us in a strong position, and were doing it based on tangible demands," Pichai added.I Microsoft's stock fell by nearly 2% after the company reported its quarterly results, but it ticked back up in the hours after. Although the company beat its revenue expectations with an increase of 16% to $83b, and profits rose 23% to $38bn, its spending on AI has hit its free cash flow. That metric, essentially how much money a company has in its bank account, is important for investors. Such a metric, however, is a projection of future sales based on a multiple of current sales. The company did not specify the base level sales figure the run-rate was calculated on. Amy Hood, Microsoft's chief financial officer, said the company's AI business was proving to be a smoother development than when the company began shifting to cloud services in the early 2010s. "The margins have been and remain better in our AI business than when we were in our cloud transition," Hood said. The company's stock is down nearly 11% so far this year, as questions around its spending on AI and its partnership with OpenAI, in which it has invested more than $10bn, have continued. Amazon's shares fell after it revealed it would make less money next quarter than initially thought, but the results themselves were in line with analyst expectations and the company's stock was up 3% by the end of the day. Asked to give an update on Amazon's plans for spending this year or next, Jassy declined, but said: "We do view this as truly a once-in-a-lifetime opportunity where every application that we know of is going to be reinvented." "I expect that we will invest a significant amount of capital over the coming years to pursue that opportunity," he added. "And that our customers, our shareholders and Amazon in general are going to be much better off down the road because we did so."