As the quarterly results of Big Tech giants are revealed over the next two weeks, the focus turns to the bankability of artificial intelligence (AI) and whether the significant investments required for its implementation are sustainable in the long term. Analysts predict that growth and earnings will accelerate with the AI revolution, signaling a wave of transformation across the industry.
Apple’s Late Start in the AI Race
Apple, a latecomer to the AI party, is expected to show only three percent growth in their upcoming results. Despite unveiling their new Apple Intelligence system last month, analysts believe the impact of these new features may not be fully realized until the release of the iPhone 16 in September. However, there is optimism around an improvement in China sales, which has been a challenge for the company in recent times.
On the other hand, Meta, formerly known as Facebook, raised its investment projections last April to further develop generative AI. This increase in spending, combined with the deceleration of growth expected by analysts, may put earnings under pressure for the company in the coming months.
Microsoft, one of the frontrunners in implementing AI across all its products, is expected to continue reporting strong results. With significant investment in OpenAI and a focus on monetizing generative AI, the company is well-positioned to benefit from the AI frenzy. However, analysts are cautious about the sustainability of the double-digit growth experienced by Microsoft in its cloud computing business.
Amazon, specifically its world-leading cloud business AWS, will need to demonstrate consistent growth to reassure investors. With a reacceleration of growth seen in the first quarter, the company aims to capitalize on the demand generated by the AI wave. However, concerns remain about the long-term sustainability of this growth trajectory.
Google’s Search Business Challenges
Google parent Alphabet faces unique challenges due to its search business online. The introduction of AI Overviews, which received mixed reviews from users, has raised concerns about the future direction of search. With a decline in searches featuring AI-generated results, there is uncertainty about the viability of this new feature. This could have implications for online advertising and revenue generation.
The future of artificial intelligence in Big Tech is not without its challenges. While companies like Microsoft and Amazon have made significant strides in incorporating AI into their business models, concerns linger about the sustainability of growth and earnings. Apple and Meta face their own set of challenges as they navigate the evolving landscape of AI technology. As the industry continues to adapt to the AI revolution, the coming weeks will provide valuable insights into the trajectory of these tech giants.
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