Microsoft, Google Report Profits Fueled by AI Investment

Facts

• Tech firms Google and Microsoft reported major profit increases for Q1 of 2024, driving up their respective stock prices and possibly indicating the viability of their heavy investment in artificial intelligence (AI).¹
• Alphabet, Google’s parent company, netted $23.7B in profit, up 57% from Q1 of last year, which Chief Executive Officer Sundar Pichai said was largely fueled by AI text-to-image model Gemini. Meanwhile, Microsoft’s profits rose 20% from Q1 of 2023, as the company earned $21.9B.¹
• Alphabet’s stock price shot up 10% on Friday in light of the report, prompting the company's first-ever dividend and a $70B buyback. The increase was the company's largest since 2015 and its 15% revenue growth, to $80.5B, was the fastest in two years.²
• Microsoft’s revenue reached $61.9B, up 17%, with its cloud computing product, Azure, growing 31%. Its $13B partnership with OpenAI has allowed it to sell access to AI technology, and Microsoft looks to continue pursuing its AI investments.³
• Chipmakers Nvidia and Advanced Micro Devices (AMD) also saw notable share price increases, and many other AI-related companies had similar results. However, the same wasn't true for Facebook's parent company Meta, which saw its share price tumble due to heavy AI investments.⁴
• Different approaches to AI investment have spurred varying results, at least in the short-term, as Microsoft and Alphabet have focused on integrating AI while Meta has prioritized aggressive investment into its AI products.⁵

Sources: ¹Al Jazeera, ²CNBC, ³New York Times, ⁴Forbes and ⁵Cointelegraph.

Narratives

• Narrative A, as provided by Silicon Republic. Recent market-shattering financial reports from Microsoft and Google further vindicate their decisions to invest heavily in AI. In just one year, revolutionary technology has fundamentally transformed the technological and financial landscape, and many companies are already seeing the benefits of their investments. Long-term investment in AI will certainly pay dividends for forward-looking companies. AI is the present and the future, and it's time for companies to embrace it before the ship leaves the dock.
• Narrative B, as provided by The Information. There's no denying that Microsoft and Google have reaped rewards from investment in AI. However, there's a major variable to consider before declaring AI investment as the key to prosperity for tech companies — Google and Microsoft don't represent the entire market. It's important to question whether large companies are benefiting from AI, or whether is AI growing because it's being propped up by tech giants. Regardless, it's not reasonable to make a final judgment on AI's position based on the results of a handful of established oligopolies.

Predictions