April 19, 2024
Tech executives are telling investors that to make money on AI, they have to spend money

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

Mandel Ngan | AFP | getty images

It was a big week for tech earnings, with Microsoft, Meta, Alphabet, Amazon and Apple all reporting in the past few days. Artificial Intelligence was on everyone’s lips.

One thing investors hear again and again from top executives is that, when it comes to AI, they have to spend money to make money.

“We’re moving from talking about AI to implementing AI at scale,” Microsoft CEO Satya Nadella said on his company’s earnings call Tuesday. “By incorporating AI into every layer of our technology stack, we are winning new customers and helping drive new profits and productivity.”

Last year marked the beginning of the generative AI boom, as companies raced to embed increasingly sophisticated chatbots and assistants into core products. Nvidia was going to make big money. Its graphics processing units, or GPUs, are at the center of big language models made by OpenAI, Alphabet, Meta, and a growing crop of heavily funded startups battling for a piece of the generative AI pie.

As 2024 approaches and executives outline their plans for ongoing investment in AI, they are giving investors more clarity about their strategies. A key priority area, based on the latest earnings call, is AI models-as-a-service, or large AI models that customers can use and customize according to their needs. The second is to invest in AI “agents,” a term often used to describe everything from chatbots to coding assistants and other productivity tools.

Overall, executives drove home the impression that AI is no longer just a toy or a concept for research labs. It’s actually here.

Cut costs to make room for AI

At the largest companies, two big areas for investment are AI initiatives and the cloud infrastructure needed to support massive workloads. To get there, cost cutting will continue in other areas, a message that has become familiar in recent quarters.

Meta CEO Mark Zuckerberg on Thursday emphasized the company’s continued AI efforts along with sweeping cost cuts.

Meta Founder and CEO Mark Zuckerberg speaks during the Meta Connect event at Meta headquarters in Menlo Park, California on September 27, 2023.

Josh Adelson | AFP | getty images

“2023 was our ‘Year of Agility,’ focused on improving our business to build Meta into a stronger technology company and providing the stability to deliver on our ambitious long-term vision for AI and the metaverse,” Zuckerberg said on the earnings call. Was focused on.”

Nadella told investors that Microsoft is committed to increasing AI investments and cloud efforts, even if it means looking closely at spending in other departments with “disciplined cost management across every team.”

Microsoft CFO Amy Hood “underscored the continuation of reorienting our workforce toward the AI-first work that we are doing without adding large numbers of people to the workforce,” and said the company will prioritize investment in AI. Will continue to give as “the thing that’s going to shape the next decade.”

The theme was similar at Alphabet, where Sundar Pichai talked about his company’s “focus and discipline” as it prioritizes enhancing AI for Search, YouTube, Google Cloud and beyond. Investing in infrastructure such as data centers is “key to realizing our big AI ambitions,” he said, adding that the company has cut back on non-priority projects and invested in automating some processes.

“We continue to invest responsibly in our data centers and compute to support this new wave of growth in AI-powered services for us and our customers,” Pichai said. “You’ve heard me talk about our efforts to permanently re-engineer our cost base and improve our speed and efficiency. That work continues.”

Within Google Cloud, Pichai said the company is cutting expenses by reallocating resources to the most important projects, slowing the pace of hiring, improving technical infrastructure and using AI to streamline processes at Alphabet. Will do. Capital spending, which totaled $11 billion in the fourth quarter, was primarily due to investments in infrastructure, servers and data centers, he said.

Alphabet finance chief Ruth Porat reiterated that the company expects full-year capital expenditures for 2024 to be “significantly larger than 2023” as it continues to invest heavily in AI and the “long-term opportunity” that AI Applications are used inside DeepMind. Cloud and other systems offer.

Amazon CEO Andy Jassy said on this week’s earnings call that generative AI “will ultimately generate tens of billions of dollars in revenue for Amazon over the next several years.”

AI will remain a heavy investment area for the company, leading to increased capital spending this year as Amazon pours more money into LLM, other generative AI projects, and the necessary infrastructure. Jassy emphasized Amazon’s AI chip efforts, naming customers like Anthropic, Airbnb, Hugging Face, Qualtrics, and Snap.

Apple CEO Tim Cook issued an announcement later this year touting generative AI as an important investment area for his company.

“As we look ahead, we will continue to invest in these and other technologies that will shape the future,” Cook said during a call with analysts. “This also includes artificial intelligence where we continue to spend considerable time and effort, and we are excited to share details of our ongoing work in that area later this year.”

Cook continued, “Without getting into too many details and without talking openly about myself, let me just say that I think there is a huge opportunity for Apple with Gen AI and AI.”

where the money is flowing

While investors want to see investment in AI by companies that are critical in providing the infrastructure, they also want to see where and how the money is being made.

Jassi said enterprise customers are looking to use existing models that they can personalize and build upon, pointing to Amazon’s Bedrock as a key focus.

“What we see is that customers want options,” Jessie said. “They don’t want just one model to rule the world. They want different models for different applications. And they want to experiment with models of all different sizes because they have different cost structures and produce different latency characteristics.”

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

Thos Robinson getty images

Nadella pointed to Microsoft Azure as offering a leading “as a service model”, emphasizing that customers do not have to manage the underlying infrastructure, yet they have access to language models large and small. There is access to a range of models, including some models from Kohre, Meta and Mistral. As well as open-source options. Nadella said a third of Azure AI’s 53,000 customers have joined in the last 12 months.

Alphabet executives highlighted Vertex AI, a Google product that offers more than 130 generative AI models for use by developers and enterprise clients like Samsung and Shutterstock.

Chatter was not limited to LLMs and chatbots. Many tech executives talked about the importance of AI agents, or AI-powered productivity tools, to complete tasks.

Ultimately, AI agents could potentially take the form of scheduling a group hangout by scanning everyone’s calendars to make sure there are no conflicts, booking travel and activities, buying gifts for loved ones, or making outbound sales. Like doing specific work. However, currently, the tools are largely limited to tasks like creating summaries, generating task lists, or helping with writing code.

Nadella is bullish on AI agents, pointing to Microsoft’s Copilot Assistant as an example of an “evolved” AI application in terms of productivity gains and a successful business model.

“You’re going to start seeing people look at these tools as productivity enhancers,” Nadella said. “I see this as a new vector for us in what I would call the next phase of knowledge work and frontline work, even in their productivity and how we participate.”

Just before Amazon’s earnings hit, the company announced Rufus, a generative AI-powered shopping assistant trained on the company’s product catalogs, customer reviews, user Q&A pages, and the broader web.

“The question is how are we thinking about Gen AI in our consumer businesses: We’re building dozens of Gen AI applications across the company,” Jassi said on the call. “There are multiple generic AI applications that we are building across each of our businesses. And they’re all at different stages, with many launched and others in development.”

Meta’s focus will also be partly on creating a useful AI agent, Zuckerberg said on his company’s call.

“Going forward, a key goal will be to build the most popular and most advanced AI products and services,” Zuckerberg said. “And if we succeed, everyone who uses our services will have a world-class AI assistant to help them get the job done.”

Alphabet executives promoted Google’s Duet AI, or “packaged AI agent” for Google Workspace and Google Cloud, which is designed to increase productivity and complete simple tasks. Within Google Cloud, Duet AI helps software developers at companies like Wayfair and GE and cybersecurity analysts at Spotify and Pfizer, Pichai said. He said Duet AI will soon include Gemini, Alphabet’s LLM that powers its Bard chatbot.

Pichai wants to offer an AI agent that can complete more and more tasks on the user’s behalf, including Google search, though he said “there’s a lot of execution ahead.”

“We will be using generative AI there again, especially with our most advanced models and Bard,” Pichai said. This “allows us to act more like an agent over time, if I think about the future, and maybe go beyond answers and do even more follow-through for users.”

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Source: www.cnbc.com

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