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Khaleej Times
5 hours ago
- Khaleej Times
Big Tech may be breaking the bank for AI, but investors love it
Big Tech is spending more than ever on artificial intelligence - but the returns are rising too, and investors are buying in. AI played a bigger role in driving demand across internet search, digital advertising and cloud computing in the April-June quarter, powering revenue growth at technology giants Microsoft, Meta, Amazon and Alphabet . Betting that momentum will sustain, Microsoft, Alphabet and Amazon are ramping up spending to ease capacity shortages that have limited their ability to meet soaring AI services demand, even after several quarters of multi-billion-dollar outlays. The results offer the clearest sign yet that AI is emerging as a primary growth engine, although the monetization journey is still in its early days, investors and analysts said. The upbeat commentary underscores how surging demand for the new technology is shielding the tech giants from tariff-driven economic uncertainty hobbling other sectors. "As companies like Alphabet and Meta race to deliver on the promise of AI, capital expenditures are shockingly high and will remain elevated for the foreseeable future," said Debra Aho Williamson, founder and chief analyst at Sonata Insights. But if their core businesses remain strong, "it will buy them more time with investors and provide confidence that the billions being spent on infrastructure, talent and other tech-related expenses will be worthwhile," she added. Microsoft shares rose 4% on Thursday, with the Windows maker crossing $4 trillion in market value - a milestone only chip giant Nvidia had reached before it. Meta was up even more, rising 11.3% adding around $200 billion to its market value of about $1.75 trillion. Amazon slipped 7% after-market, after rising 1.7% in regular trading, on disappointing cloud computing results. All the companies have faced intense scrutiny from investors over their ballooning capital expenditures, which were expected to total $330 billion this year before the latest earnings. And until a few days ago, the Magnificent Seven stocks were also trailing the SP 500 in year-to-date performance. SILENCING DOUBTS Microsoft said on Wednesday it would spend a record $30 billion in the current quarter, after better-than-expected sales and an above-estimate forecast for its Azure cloud computing business showcased the growing returns on its massive AI bets. The prediction puts Microsoft on track to potentially outspend its rivals over the next year. It came after Google-parent Alphabet beat revenue expectations and raised its spending forecast by $10 billion to $85 billion for the year. Microsoft also disclosed for the first time the dollar figure for Azure sales and the number of users for its Copilot AI tools, whose adoption has long been a concern for investors. It said Azure generated more than $75 billion in sales in its last fiscal year, while Copilot tools had over 100 million users. Overall, around 800 million customers use AI tools peppered across Microsoft's sprawling software empire. "It's the kind of result that quickly silences any doubts about cloud or AI demand," said Josh Gilbert, market analyst at eToro. "Microsoft is more than justifying its spending." Amazon, for its part, said it expected second-half spending roughly at the same clip as its second-quarter total of $31.4 billion, suggesting it would spend around $118 billion for the full year. Analysts had projected about $100 billion. Other AI companies have also attracted a clutch of users. Alphabet said last week its Gemini AI assistant app has more than 450 million monthly active users. OpenAI's ChatGPT, the application credited with kicking off the generative AI frenzy, has around 500 million weekly active users. Meta, meanwhile, raised the bottom end of its annual capital expenditure forecast by $2 billion, to a range of between $66 billion and $72 billion. It also said that costs driven by its efforts to catch up in Silicon Valley's intensifying AI race would push 2026 expense growth rate above 2025's pace. Better-than-expected sales growth in the April-June period and an above-estimate revenue forecast for the current quarter, however, assured investors that strength in the social media giant's core advertising business can support the massive outlays. "The big boys are back," said Brian Mulberry, portfolio manager at Zacks Investment Management, which holds shares in all three major U.S. cloud providers. "This simply proves the Magnificent Seven is still magnificent at this moment in time."
Gulf Today
a day ago
- Gulf Today
Brazil's Pix raises hopes of digital payments system
Brazil has a new instant payment system, which is backed by the central bank. It is called Pix. Majority of Brazilians are using it to buy vegetables as well as do high-end shopping with it. When people offer to pay, the immediate question the vendors ask is, 'Do you have Pix?' To use it requires a simple registration process. It requires a bank account, email and a phone number. One registers for Pix through a tax identity number, akin to the social security number in the United States. Usually, such instant payments systems are managed by a consortium of banks. But in Brazil, the central bank is the chief backer of the payment mode. It was launched in 2020, and it picked up momentum during the Covid period. While it has digitized transactions, Brazil seems to have made the Big Brother in the neighbourhood, the United States, hostile. Meta was planning to launch a WhatsApp payment system around the same time in Brazil, but the Brazilian authorities delayed in granting permission until 2021. The WhatsApp payment system could not match the popularity of Pix. The Office of the US Trade Representative had issued a statement in July saying that it was investigating whether Brazil had indulged in 'unfair trade practices' by privileging its own digital payment system over that of the American big tech companies like Meta. It said that Brazil through Pix 'may harm the competitiveness of American companies'. Brazil hit back when a government-run social media ran a campaign with the slogan 'Pix is ours, My Friend.' And an Instagram message of the government said, 'Seems like our Pix is causing a lot of jealousy abroad, you know.' American Nobel Prize winning economist and columnist Paul Krugman is all praise for Pix. He has quoted an International Monetary Fund (IMF) report which said that the transaction costs of Pix are lower and free for individuals. For merchants and firms, the transaction cost is 0.33 per cent, while it is 1.13 per cent for credit cards and 2.34 per cent for credit cards. Individual users do not have to pay any transaction costs. He also said that the Pix processing time is three seconds, while it takes two days for debit cards and 28 days for credit cards. While Krugman speculates on the possibility of creating a Central Bank Digital Currency (CBDC), and the obstacles in the way of US Federal Reserve to implement such a plan, Brazil is moving towards a digital currency of its own called Drex. This is seen as a way to complement Pix. Nathalie Janson, professor of economics at NEOMA in France, says that there is no demand for a mode of digital payment like Pix in Europe as most Europeans have bank accounts. In Brazil, Pix is open to people without bank accounts. She says, 'Pix was a voluntary project by the Brazilian authorities to expand banking access.' It is interesting that the Indian digital payment system, UPI, has become popular too and widespread, but there is competition through the privately-managed PayTM. And the Indian digital payment system is becoming acceptable in some other countries like Singapore, Bhutan, Nepal, France, Mauritius, Sri Lanka, Oman, UK, Malaysia, Japan, Thailand and the United Arab Emirates (UAE). So, the digital payments system is gaining acceptance in the Global South. Whether this will lead to a digital national currency remains to be seen. The United States is interested in pushing cryptocurrency. But the risk factor is greater in it. Only when a central bank backs a digital currency that it will gain trust and confidence of market players, and not just the speculators.
The National
a day ago
- The National
Tesla ordered to pay $243 million in lawsuit over 2019 Autopilot crash
Tesla was ordered to pay $243 million in a lawsuit over the fatal 2019 Autopilot-equipped Model S crash, marking the first major court loss for Elon Musk's electric vehicle company concerning its driver-assistance technology. A jury in Miami federal court in Florida on Friday found that Tesla was responsible for about a third of the accident in the state that killed one pedestrian and seriously injured another when the Tesla Model S drove through a T-intersection and hit a parked car at 80.5kph. The jury assigned the remaining two-thirds to the driver, who was reaching for his mobile phone at the time of the crash. 'Today's verdict is wrong and only works to set back automotive safety and jeopardise Tesla's and the entire industry's efforts to develop and implement life-saving technology. We plan to appeal given the substantial errors of law and irregularities at trial,' Tesla said in a statement. Brett Schreiber, a lawyer for the plaintiffs, said after the verdict: 'Tesla designed Autopilot only for controlled-access highways yet deliberately chose not to restrict drivers from using it elsewhere, alongside Elon Musk telling the world Autopilot drove better than humans.' Mr Musk, the world's richest person, is Tesla's chief executive and majority Tesla shares fell 1.8 per cent at the market close on Friday, and are down 25 per cent this year. In the second quarter of 2025, Tesla said in its safety report that it recorded one crash for every 6.69 million miles driven in which drivers were using its Autopilot technology. For drivers who were not using Autopilot, it recorded one crash for every 963,000 miles driven. By comparison, the most recent data available from National Highway Traffic Safety Administration and Federal Highway Administration (from 2023) shows that in the US there was an car crash approximately every 702,000 miles. Tesla markets its automated driving systems under two brand names – Autopilot and Full Self-Driving. All new Tesla cars come with the Autopilot driver-assist feature as a standard option and the company sells the more advanced Full Self-Driving at a premium for an additional $10,000. Autopilot allows the car to steer, accelerate and brake automatically for other vehicles and pedestrians. Full Self-Driving offers more enhanced features such as auto-parking and automatic lane changes while driving on the motorway.
