Tech execs are telling investors they have to spend money to make money on AI

By omshreeinfotech Feb 3, 2024
Tech execs are telling investors they have to spend money to make money on AI


Google CEO Sundar Pichai, arrives for a US Senate bipartisan Artificial Intelligence (AI) Insight Forum on the US Capitol in Washington, DC, on September 13, 2023.

Mandel Ngan | AFP | Getty Images

It was a giant week for tech earnings, with Microsoft, Meta, AlphabetAmazon and Apple all reporting over the previous few days. Artificial intelligence was on everybody’s lips.

One theme investors heard repeatedly from high execs is that, when it comes to AI, they have to spend money to make money.

“We transfer from speaking about AI to making use of AI at scale,” Microsoft CEO Satya Nadella mentioned on his firm’s earnings name on Tuesday. “By infusing AI throughout each layer of our tech stack, we are successful new prospects and serving to drive new advantages and productiveness features.”

Last 12 months marked the start of the generative AI increase, as corporations raced to embed more and more refined chatbots and assistants throughout key merchandise. Nvidia was the massive moneymaker. Its graphics processing items, or GPUs, are on the coronary heart of the massive language fashions created by OpenAI, Alphabet, Meta and a rising crop of closely funded startups all battling for a slice of the generative AI pie.

As 2024 will get rolling and executives define their plans for ongoing funding in AI, they’re extra clearly spelling out their methods to investors. One key precedence space, primarily based on the most recent earnings calls, is AI models-as-a-service, or giant AI fashions that purchasers can use and customise in accordance to their wants. Another is investing in AI “brokers,” a time period typically used to describe instruments starting from chatbots to coding assistants and different productiveness instruments.

Overall, executives drove dwelling the notion that AI is not only a toy or an idea for the analysis labs. It’s right here for actual.

Cutting prices to make room for AI

Meta founder and CEO Mark Zuckerberg speaks throughout Meta Connect occasion at Meta headquarters in Menlo Park, California on September 27, 2023.

Josh Edelson | AFP | Getty Images

“2023 was our ’12 months of effectivity’ which targeted on making Meta a stronger expertise firm and bettering our enterprise to give us the steadiness to ship our bold long-term imaginative and prescient for AI and the metaverse,” Zuckerberg mentioned on the earnings name.

Nadella advised investors that Microsoft is dedicated to scaling AI funding and cloud efforts, even when it means trying intently at bills in different departments, with “disciplined value administration throughout each group.”

Microsoft CFO Amy Hood underlined the “consistency of repivoting our workforce towards the AI-first work we’re doing with out including materials variety of individuals to the workforce,” and mentioned the corporate will proceed to prioritize investing in AI as “the factor that is going to form the following decade.”

The theme was related at Alphabet, the place Sundar Pichai spoke of his firm’s “focus and self-discipline” because it prioritizes scaling up AI for Search, YouTube, Google Cloud and past. He mentioned investing in infrastructure resembling information facilities is “key to realizing our massive AI ambitions,” including that the corporate had reduce nonpriority initiatives and invested in automating sure processes.

“We proceed to make investments responsibly in our information facilities and compute to assist this new wave of development in AI-powered providers for us and for our prospects,” Pichai mentioned. “You’ve heard me speak about our efforts to durably reengineer our value base and to enhance our velocity and effectivity. That work continues.”

Within Google Cloud, Pichai mentioned the corporate would reduce bills by reallocating sources to a very powerful initiatives, slowing the tempo of hiring, bettering technical infrastructure and utilizing AI to streamline processes throughout Alphabet. Capital expenditures, which totaled $11 billion within the fourth quarter, had been largely due to funding in infrastructure, servers and information facilities, he mentioned.

Ruth Porat, Alphabet’s finance chief, reiterated that the corporate expects full-year capital expenditures for 2024 to be “notably bigger than 2023,” because it continues to make investments closely in AI and the “long-term alternative” that AI functions inside DeepMind, Cloud and different methods supply.

Amazon CEO Andy Jassy mentioned on this week’s earnings name that generative AI “will finally drive tens of billions of {dollars} of income for Amazon over the following a number of years.”

AI will proceed to be a heavy funding space for the corporate, driving a rise in capital expenditures this 12 months as Amazon pours extra money into LLMs, different generative AI initiatives, and the required infrastructure. Jassy emphasised Amazon’s AI chip efforts, naming prospects resembling Anthropic, Airbnb, Hugging Face, Qualtrics and Snap.

Apple CEO Tim Cook pointed to generative AI as a big funding space for his firm, teasing an announcement later this 12 months.

“As we glance forward, we’ll proceed to put money into these and different applied sciences that may form the longer term,” Cook mentioned throughout a name with analysts. “That contains synthetic intelligence the place we proceed to spend an incredible quantity of effort and time, and we’re excited to share the small print of our ongoing work in that house later this 12 months.”

Cook added, “Let me simply say that I feel there’s an enormous alternative for Apple with Gen AI and AI, with out stepping into extra particulars and getting out in entrance of myself.”

Where the money is flowing

While investors need to see investments in AI by the businesses that are key to offering the infrastructure, they additionally need to see the place and the way money is being made.

Jassy mentioned enterprise purchasers are trying to use present fashions that they can personalize and construct on, pointing to Amazon’s Bedrock as a key focus.

“What we see is that prospects need selection,” Jassy mentioned. “They don’t desire only one mannequin to rule the world. They need totally different fashions for various functions. And they need to experiment with all different-sized fashions as a result of they yield totally different value constructions and totally different latency traits.”

Andy Jassy on stage on the 2022 New York Times DealBook in New York City, November 30, 2022.

Thos Robinson | Getty Images

Nadella pointed to Microsoft Azure as a predominant “mannequin as a service” providing, emphasizing that prospects do not have to handle underlying infrastructure but have entry to a spread of enormous and small language fashions, together with some from Cohere, Meta and Mistral, in addition to open-source choices. One-third of Azure AI’s 53,000 prospects joined throughout the previous 12 months, Nadella mentioned.

Alphabet executives highlighted Vertex AI, a Google product that provides greater than 130 generative AI fashions to be used by builders and enterprise purchasers resembling Samsung and Shutterstock.

Chatter wasn’t restricted to LLMs and chatbots. Many tech execs talked concerning the significance of AI brokers, or AI-powered productiveness instruments for finishing duties.

Eventually, AI brokers might doubtlessly take the type of scheduling a gaggle hangout by scanning everybody’s calendar to make positive there are no conflicts, reserving journey and actions, shopping for presents for family members or doing a selected job perform resembling outbound gross sales. Currently, although, the instruments are largely restricted to duties like summarizing, producing to-do lists or serving to write code.

Nadella is bullish on AI brokers, pointing to Microsoft’s Copilot assistant for example of an “advanced” AI software when it comes to productiveness advantages and a profitable enterprise mannequin.

“You are going to begin seeing individuals consider these instruments as productiveness enhancers,” Nadella mentioned. “I do see this as a brand new vector for us in what I’ll name the following part of information work and frontline work, even of their productiveness and the way we take part.”

Just earlier than Amazon’s earnings hit, the corporate introduced Rufus, a generative AI-powered procuring assistant skilled on the corporate’s product catalog, buyer opinions, person Q&A pages and the broader internet.

“The query about how we’re fascinated with Gen AI in our client companies: We’re constructing dozens of generative AI functions throughout the corporate,” Jassy mentioned on the decision. “Every enterprise that we have has a number of generative AI functions that we are constructing. And they’re all in several phases, a lot of which have launched and others of which are in improvement.”

Meta can even be targeted, partly, on constructing a helpful AI agent, Zuckerberg mentioned on his firm’s name.

“Moving ahead, a serious aim might be constructing the preferred and most superior AI services,” Zuckerberg mentioned. “And if we succeed, everybody who makes use of our providers will have a world-class AI assistant to assist get issues executed.”

Alphabet executives touted Google’s Duet AI, or “packaged AI brokers” for Google Workspace and Google Cloud, designed to increase productiveness and full easy duties. Within Google Cloud, Duet AI assists software program builders at corporations like Wayfair and GE, and cybersecurity analysts at Spotify and Pfizer, Pichai mentioned. He added that Duet AI will quickly incorporate Gemini, Alphabet’s LLM that powers its Bard chatbot.

Pichai needs to supply an AI agent that may full an increasing number of duties on a person’s behalf, together with inside Google Search, although he mentioned there’s “a number of execution forward.”

“We will once more use generative AI there, notably with our most superior fashions and Bard,” Pichai mentioned. That “permits us to act extra like an agent over time, if I had been to take into consideration the longer term and possibly transcend solutions and follow-through for customers much more.”

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