Microsoft, Meta CEOs defend hefty AI spending after DeepSeek stuns tech world

Following the groundbreaking revelation by the Chinese newcomer DeepSeek regarding cost-effective AI computing, the tech industry in the U.S. was sent into a frenzy. In response, the CEOs of Microsoft and Meta stood firm, defending their substantial investments as crucial for maintaining competitiveness in this emerging field.

The rapid advancements made by DeepSeek have raised questions about America’s AI dominance, boasting models that purportedly rival or surpass Western counterparts at a fraction of the cost. Despite this, U.S. executives emphasized on Wednesday the necessity of building extensive computer networks to meet the escalating demands of corporations.

“Heavy investment in capital expenditure and infrastructure will undoubtedly confer a strategic advantage over time,” remarked Meta’s CEO Mark Zuckerberg during an earnings call.

Satya Nadella, Microsoft’s CEO, echoed the sentiment, citing the imperative nature of the spending to alleviate capacity restrictions that have hindered the tech giant’s AI ventures.

“With the increasing efficiency and accessibility of AI, we anticipate a surge in demand,” he stated during an analyst call.

In its current fiscal year, Microsoft has allocated a staggering $80 billion for AI initiatives, while Meta has committed up to $65 billion towards the technology.

This contrasts sharply with DeepSeek’s claim of spending approximately $6 million on developing its AI model. U.S. tech leaders and financial analysts argue that this disparity primarily reflects the investment in computing power, rather than overall development costs.

Nevertheless, some investors are starting to display impatience towards the substantial spending and the absence of substantial returns.

Following the announcement that growth in its Azure cloud business for the current quarter would fall below estimates, Microsoft’s shares plummeted by 5% in after-hours trading. The company, often regarded as a frontrunner in the AI race due to its association with industry leader OpenAI, faced scrutiny.

“We are eager to see a clear roadmap outlining the monetization model for the considerable capital invested,” remarked Brian Mulberry, a portfolio manager at Zacks Investment Management, which holds shares in Microsoft.

Meanwhile, Meta provided conflicting signals regarding the success of its AI-driven tools, reporting a robust fourth quarter but a lackluster sales forecast for the upcoming period.

“Given the substantial expenditures, there is a pressing need to enhance revenue generation. This week serves as a wake-up call for the U.S.,” commented Daniel Newman, an analyst at Futurum Group.

“Currently, there is excessive capital expenditure in AI and insufficient consumption.”

However, there are indications that executives are taking steps to address this issue.

Amy Hood, Microsoft’s CFO, revealed that the company’s capital spending in the current and upcoming quarters would remain consistent with the $22.6 billion level observed in the second quarter.

“In fiscal 2026, we anticipate sustained investments in response to strong demand signals. Nevertheless, the growth rate is projected to be lower compared to fiscal 2025,” she stated.

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