Editorial & Advertiser disclosure

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

Headlines

Posted By Global Banking and Finance Review

Posted on January 30, 2025

Microsoft, Meta back big AI spending despite DeepSeek's low costs

By Aditya Soni and Deborah Mary Sophia

(Reuters) -Days after Chinese startup DeepSeek's breakthrough low-cost AI computing shook the U.S. technology industry, CEOs of Microsoft and Meta defended massive spending saying it was crucial to staying competitive in the new field.

DeepSeek's quick advances with models that it claimed can match or even outperform Western rivals at a fraction of the cost stirred doubts about the lead U.S. has, but the top executives said building huge computer networks was necessary to serve growing corporate needs.

"Investing very heavily in capital expenditure and infrastructure is going to be a strategic advantage over time," Meta CEO Mark Zuckerberg said on a post-earnings call.

Microsoft CEO Satya Nadella said the spending would ease capacity constraints that have hampered the technology giant's ability to capitalize on AI.

"As AI becomes more efficient and accessible, we will see exponentially more demand," he said on a call with analysts.

Microsoft has earmarked $80 billion for AI in its current fiscal year, while Meta has pledged as much as $65 billion.

That is a far cry from the roughly $6 million DeepSeek said it has spent to develop its AI model. U.S. executives and Wall Street analysts said that is the amount spent on computing power, rather than all development costs.

Still, some investors seem to be losing patience with the hefty spending and lack of big payoffs. 

Shares of Microsoft — widely seen as a frontrunner in the AI race because of its ties to industry leader OpenAI - were down 6% in early trading on Thursday after the company said growth in its Azure cloud business would miss third-quarter estimates. 

"We really want to start to see a clear roadmap to what that monetization model looks like for all of the capital that's been invested," said Brian Mulberry, portfolio manager at Zacks Investment Management, which holds shares in Microsoft.

Meta, meanwhile, sent mixed signals about how its bets on AI-powered tools were paying off with a strong fourth quarter, but a lackluster sales forecast for the first quarter. Its shares were up more than 4% on Thursday.

"With these huge expenses, they need to turn the spigot on in terms of revenue generated, but this week was a wake-up call for the U.S.," said Futurum Group analyst Daniel Newman.

"For AI right now, there's too much capital expenditure, not enough consumption."

There are some signs that executives are aiming to keep a check on expenditure.

Microsoft CFO Amy Hood said capital spending in the third and fourth quarters would remain around the $22.6 billion, a level seen in the second quarter. 

"In fiscal 2026, we expect to continue to invest against strong demand signals. However, the growth rate will be lower than fiscal 2025 (which ends in June)," she said.

(Reporting by Aditya Soni and Deborah Sophia in Bengaluru; Editing by Subhranshu Sahu and Arun Koyyur)

Recommended for you

  • Trump postpones call with Panama's president as canal tensions simmer

  • Trump says he may meet Ukraine's Zelenskiy next week

  • US interest boosts Greenland's independence bid in talks with Denmark, party says