The world’s cloud computing giants are reportedly upping spending as generative artificial intelligence (AI) takes off.
Capital spending by Google, Amazon and Microsoft jumped to a combined $42 billion for the three months up to September, the Financial Times (FT) reported Sunday (Nov. 5). That figure marks a 10% increase from the prior quarter, with analysts projecting cloud-related spending to increase further in 2024.
As the report notes, executives from the three tech giants have said recently that large amounts of the capital budgets are being earmarked for generative AI systems that need vast amounts of computing and data power.
Amazon CEO Andy Jassy has projected that generative AI will drive “tens of billions in revenues.”
As PYMNTS reported in October, Amazon Web Services revenue rose 12% year over year in the company’s most recent quarter, to $919 million.
“Companies have moved more slowly in an uncertain economy in 2023 to complete deals, but we’re seeing the pace and volume of closed deals pick up,” Jassy said. He added that generative AI is allowing companies to create agents to carry out tasks such as answering questions or automating workflows.
As for Google, PYMNTS wrote last month that the company was “hitting the quarter century mark in a new era of innovation demarcated by the generative AI capabilities and foundation models that its own research labs and teams helped spearhead.”
During Alphabet’s most recent earnings call, CEO Sundar Pichai told investors that “more than half of all funded generative AI startups are Google Cloud customers.”
He rattled off a few company names for the audience and pointed out that more than 60% of the world’s 1,000 largest enterprise organizations employ Google Cloud to support their workflows.
During the previous quarter, Pichai had mentioned that 70% of generative AI unicorns were using Google Cloud. In the time since Q2 and Q3 2023, Pichai said that the number of active generative AI projects being developed using Alphabet-owned platforms grew by sevenfold.
Google’s Cloud revenue grew 22% from a year earlier, almost double the rate of growth for the company as a whole.
All three companies are trying to capture a larger share of the cloud market and must stay competitive in AI “or they’ll lose relevance and market share,” Jeff Pearson, managing director at technology consultancy Slalom, told the FT. “All that is going to require a tremendous amount of capex,” for equipment like data centers and servers.