Microsoft, Meta Defend Hefty Ai Spending After Deepseek Stuns Tech World

DeepSeeks quick progress has stirred doubts about the lead America has in AI with models that it claims can match or even outperform Western rivals at a fraction of the cost, but the US executives said on Wednesday that 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.

Satya Nadella, CEO of Microsoft, said the spending was needed to overcome the capacity constraints that have hampered the technology giants ability to capitalise 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 US80-billion for AI in its current fiscal year, while Meta has pledged as much as 65-billion towards the technology.

With these huge expenses, they need to turn the spigot on in terms of revenue generated, but I think this week was a wake-up call for the US, said Futurum Group analyst Daniel Newman. For AI right now, theres too much capital expenditure, not enough consumption.