AI Business Returns Still Unclear
Cloud computing metrics are an important reference for measuring AI value. Cloud services not only provide the computing power foundation for AI products but also integrate many AI services.
Microsoft Azure and Google Cloud showed different trends in the second quarter:
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Microsoft Azure cloud service revenue grew 29% year-over-year, below the expected 30.6%. AI-related revenue accounted for 8%, up only 1 percentage point from the previous quarter. New enterprise cloud contract value growth slowed from 29% to 17%. Microsoft also lowered its Azure cloud service growth forecast to 28%~29%.
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Google Cloud revenue exceeded $10 billion for the first time, reaching $10.3 billion, with a growth rate of 28.8%, an improvement from the first quarter.
Based on the performance of these two companies, it's still difficult to conclude whether AI is truly driving revenue growth.
Continuously Increasing Capital Expenditures
Although the commercial effects of AI are unclear, its impact on costs is already evident:
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Microsoft's second-quarter capital expenditure (including finance leases) reached $19 billion, up 77.6% year-over-year. Almost all of this spending was on AI-related investments.
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Google's second-quarter capital expenditure was $13.2 billion, with a full-year 2024 forecast of at least $49.2 billion, up 52% year-over-year.
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Meta also raised the lower limit of its full-year capital expenditure forecast to $37 billion, expecting significant growth in 2025.
These investments have started to affect profit margins. Microsoft's second-quarter operating profit margin decreased by 0.1 percentage points year-over-year, the first decline since fiscal year 2024.
Better to Over-Invest Than Miss Out
Faced with high investments and uncertain short-term returns, tech giant executives offered two explanations:
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Acknowledging potential over-investment. Google CEO Pichai stated that AI products need time to mature. Microsoft CFO Hood mentioned that AI investments might take 15 years or longer to yield returns.
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Insisting on heavy AI investment. Pichai emphasized that for Alphabet, the risk of under-investing in AI far outweighs that of over-investing. Meta CEO Zuckerberg stated that he'd rather build computing capacity in advance than miss out on the most important technology for the next 10 to 15 years.
From a business evolution perspective, tech giants' big bets on AI are not without reason. Historically, the market cap of leading companies in each wave of technological revolution has added another zero compared to the previous wave. Sam Altman predicts that AI could potentially double global GDP in 10-15 years, with a potential commercialization space of at least tens of trillions of dollars.
The only uncertainty is how many of these AI-betting giants will truly benefit in the end.