| AI spending spree | | | 
Data: Financial Modeling Prep. Chart: Axios Visuals
Five of the Magnificent 7 reported earnings this week: All but Meta jumped afterward, with Amazon hitting a record high, Axios' Madison Mills reports.
- The results, and the market response, capture the debate consuming Wall Street: How much return can the tech giants get on AI, their biggest bet ever?
Demand for AI infrastructure, tools and power outstrips supply, notes Evan Schlossman of investment fund SuRo Capital.
- "That is what's directly leading to this increase in spending."
?? Zoom in: This quarter, companies laid out clearer cases for their AI investments.
- Meta and Google said AI is fueling higher ad revenue.
- Microsoft talked about demand for its AI tools from cloud customers.
- Apple teased an AI-enabled Siri coming in 2026.
By the numbers: Wall Street thinks that by 2026, the big tech companies will spend about 94% of their operating cash (after certain items) on AI projects, according to Bank of America.
- That's up from 76% in 2024, showing how quickly AI spending is taking off.
?? Between the lines: All these companies are spending big on AI, but only Meta got dinged for it, even though its ratio of spending to revenue is the lowest among peers.
- Investors were pleased with Meta's "year of efficiency" in 2023 and may feel as if Meta CEO Mark Zuckerberg is "treating shareholders' cash as if it's his cash," Gil Luria, managing director at the investment firm D.A. Davidson, tells Axios.
- Zuckerberg told investorsWednesday: "Being able to make a significantly larger investment here is very likely to be a profitable thing ... over some period."
The bottom line: AI is a highly expensive bet, and nobody knows yet if it will pay off.
- So far, companies are spending their own money. But if they take on debt to fuel AI development, and demand doesn't catch up, that could shake up America's whole financial system, Luria says.
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