Tech titans, including Alphabet, Microsoft, Amazon, and Meta are set to reveal their highly-anticipated revenue report in the July-September quarter, as reported by LSEG data.
Their earnings will further disclose the reality of the AI boom and bubble driven by the billions of investments into artificial intelligence and next-gen data centers.
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In recent months, the spectre of an AI bubble has been gaining ground due to a circular web of deals sealed by the big techs and moguls.
Despite the warning from prominent business leaders, including OpenAI Sam Altman, Jeff Bezos, and Goldman Sachs CEO David Solomon, the frenzy in tech stocks has outpaced.
The disheartened Investors have started to shift away from hyped-up stocks and adopted the strategies, reverberating like the dot-com era.
High Spending, Uncertainty in AI returns
According to an MIT study that assessed 300 AI projects, only 5 percent were able to deliver the gains, with most stalling at the conceptual stage.
On the contrary, this year the tech giants are expected to spend $400 billion in AI infrastructure and cloud computing.
OpenAI co-founder Andrej Karpathy said earlier this month, “Overall, the models are not there. I feel like the industry is making too big of a jump and is trying to pretend like this is amazing, and it’s not. It’s slop.”
Rising concerns over ‘Circular Deals’
The market’s anxiety is further exacerbated by the web of circular deals among the tech giants, such OpenAI, AMD, Nvidia, and Meta. The web mirrors the dotcom bubble.
Recently, Nvidia poured $100 billion investment in OpenAI for next-gen gigawatts data centers. Moreover, OpenAI is also entangled in $1trillion computing deals.
“When the same companies are both funding and relying on each other, decisions may no longer be based on real demand or performance – but on reinforcing growth expectations,” said Ahmed Banafa, engineering professor at San Jose State University.
Regardless of the market’s nervousness, some investors are betting high on balance sheet and arguing that “market is not yet in a bubble.”
Tech giants’ quarterly earning expectations
According to Reuters, Alphabet, Microsoft, Amazon, and Meta are projected for strong revenue growth in the quarter.
Microsoft Azure revenue is expected to grow by 38.4 percent, outshining Google Cloud which would exhibit 30.1 percent, and Amazon will show growth of 18 percent as reported by Visible Alpha data.
When it comes to profit, all companies are expected to witness regression in profit except Microsoft driven by AI spending.
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