Microsoft and Meta defend AI spend post DeepSeek shock
Tech giants Microsoft and Meta both addressed and defended their substantial investments in artificial intelligence (AI), despite recent headwinds.
Both firms kicked off the earnings season on Wednesday, just days after Chinese startup DeepSeek broke the internet, as well as the market, on Monday.
Its recent global traction followed the release of its new AI model, which was compared to leading generative systems such as ChatGPT and Gemini.
It erased a total of almost $1 trillion in cumulative market value amongst leading tech giants, stirring doubts about AI investment.
Following their results, Microsoft and Meta defended their AI investments as key to leading the race.
On Wednesday, Microsoft reported earnings per share of $3.11 (£2.49) on revenue of $68.78bn (£55.21bn).
This marks an overall 11 per cent year over year growth, the firm’s slowest pace since 2023.
This was driven partly by delays from a third party provider affecting the growth of its cloud platform, Azure.
Despite these challenges, chief executive Satya Nadella stressed the importance of continued investment in AI infrastructure to meet anticipated demand.
“As AI becomes more efficient and accessible, we will see exponentially more demand”, he told analysts.
Microsoft has allocated $80bn(£64.33bn) for AI development in the current financial year.
Yet, investors remained sceptical.
Brian Mulberry from Zacks Investment Management, which holds shares in Microsoft, said: “We really want to start to see a clear road map to what that monetisation model looks like for all of the capital that’s been invested”.
Meta’s owner Mark Zuckerberg also addressed the issue of AI spend as his quarterly numbers were announced on Wednesday.
This growth was driven by strong advertising revenue and a five per cent increase in user numbers, which hit 3.35bn in December.
The tech giant reported better than expected fourth quarter results, with revenues rising 22 per cent, to $164.5bn ($132.06bn).
Zuckerberg stated that it’s too early to assess AI spending’s full impact, yet affirmed Meta’s commitment to its substantial investment to yield long term benefits,
His firm spent $60-65bn (£48-52bn) in AI this year alone.
He announced that although DeepSeek has been able to train its AI model at a low cost, investment will be needed to run a software with “a higher level of intelligence and a higher quality of service”.
Russ Mould, investment director at AJ Bell, called Meta’s results “just what the doctor ordered after DeepSeek”.
Yet, he said Meta “continuing to invest heavily in AI, although whether there will be any change of tack off the back of DeepSeek’s emergence remains to be seen.”