Jim Cramer says Big Tech is underspending on AI. Here's why they may need to spend more
"These companies aren't overspending on AI, they are actually underspending on AI," Cramer said. "See, this is a winner-take-all, loser-take-none situation. The only reason to spend less is if you don't believe you can win."
Tech megacaps have been shelling out more and more money on AI as the race for dominance in the field intensifies. Meta, Amazon, Alphabet and Microsoft intend to spend as much as $320 billion combined on AI technology and datacenter buildouts in 2025, CNBC reported. That's a marked increase from $230 billion in total capital expenditures in 2024. Companies have especially been clamoring for AI products from Nvidia. The AI darling has seen its market cap swell dramatically over the past few years. Nvidia became the first-ever company on the market to reach $4 trillion earlier this month, securing its status as the largest outfit in the world.
There are some on Wall Street who believe tech giants' AI investments will not pay off, Cramer said. But Alphabet's recent quarter suggests that such criticism is unwarranted, he said.
Alphabet comfortably beat estimates for earnings and revenue when it reported Wednesday night. The company also announced it would add $10 billion to its capital expenditures, citing growing demand for its cloud services. The search giant is continuing to bolster infrastructure in order to power AI services that use its cloud technology.
Alphabet's spending seems justified to Cramer, he said, which makes him think that these investments are "both urgent and needed." AI spending has also been driving market gains, he added.
Cramer conceded that he understands some of the AI skepticism, especially from those who are wary of chatbots. He described the way he's seen AI chatbots make mistakes and even fabricate information. But Cramer indicated that the technology will improve, especially as companies buy more advanced chips from Nvidia.
"My take is that Google is upping its spending because the most accurate chatbot will be the winner, just like how Google search won to begin with," he said. "The bots that are wrong too often will lose. And just like Google search, if you win the AI race, you can end up with a near monopoly and hundreds of billions of dollars in profits."
Click here to download Jim Cramer's Guide to Investing at no cost to help you build long-term wealth and invest smarter.Disclaimer The CNBC Investing Club Charitable Trust owns shares of Alphabet, Nvidia, Meta, Microsoft and Amazon.
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Yahoo
22 minutes ago
- Yahoo
Trump tariffs live updates: India hit with 50% tariffs as Trump's sweeping trade measures roll out
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You can see the new rates Trump is set to levy in the graphic below: Trump also said this week that he would soon announce tariffs on semiconductor and pharmaceutical imports, as he prepares to add more sectoral duties to his mix of tariffs. He said duties on pharma could eventually balloon as high as 250%. In the past several days, Trump has unleashed a flurry of deals and trade moves leading up to his self-imposed deadline: Trump granted Mexico, the US's largest trading partner, a 90-day reprieve on higher tariffs. Trump hiked tariffs on Canadian imports to 35%, though goods contained in the US-Mexico-Canada agreement are exempt, keeping this hike's impact limited so far. The US agreed to a trade deal with South Korea. The agreement includes a 15% tariff rate on imports from the country, while the US will not be charged a tariff on its exports. Trump imposed 50% tariffs on semi-finished copper products starting Aug. 1. The president signed an order to end the de minimis exemption on low-value imports under $800, thereby applying tariffs from Aug. 29. Trump signed another order to impose a total of 50% tariffs on many goods from Brazil. However, it exempts key US imports like orange juice and aircraft parts that benefit Embraer (ERJ). The US and EU agreed to a trade deal that imposes 15% tariffs on EU goods. The nations are still working on finalizing many terms of the deal. Read more: What Trump's tariffs mean for the economy and your wallet Here are the latest updates as the policy reverberates around the world. Trump hits India with additional 25% tariff over Russia oil buys President Trump has hit India with an additional 25% tariff due to India's purchase of Russian oil. The US president threatened India with higher tariffs earlier this week, which India's Prime Minister Narendra Modi called "unjustified," also calling out the US for its double standard over Russia. 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New Delhi said it would take all necessary steps to protect its economic interests. Bloomberg News reports: Read more here. Nvidia partner Hon Hai's July sales growth weakened by tariffs Nvidia's (NVDA) main server assembly partner Hon Hai Precision ( reported a sales slowdown for July due to US tariffs. Bloomberg News reports: Read more here. President Trump has hit India with an additional 25% tariff due to India's purchase of Russian oil. The US president threatened India with higher tariffs earlier this week, which India's Prime Minister Narendra Modi called "unjustified," also calling out the US for its double standard over Russia. In an interview with CNBC on Tuesday, Trump said that India was helping to fuel the war machine. 'They're fueling the war machine. And if they're going to do that, then I'm not going to be happy,' Trump said. 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A stronger yen and the impact of President Trump's tariffs took their toll, but the company raised its full-year forecast. Reuters reports: Read more here. China draws red lines on US chip tracking with Nvidia meeting China is pushing back against the US over chips despite their overall trade truce. Last week, Beijing summoned Nvidia (NVDA) staff over security concerns with H20 chips, signaling opposition to the US plans to track advanced semiconductors. Analysts view China's latest move as a warning that it will not allow the US to dominate the chip sector. Bloomberg News reports: Read more here. China is pushing back against the US over chips despite their overall trade truce. Last week, Beijing summoned Nvidia (NVDA) staff over security concerns with H20 chips, signaling opposition to the US plans to track advanced semiconductors. Analysts view China's latest move as a warning that it will not allow the US to dominate the chip sector. Bloomberg News reports: Read more here. Trump says he's readying more tariffs on Russian energy buyers Bloomberg News reports: Read more here. Bloomberg News reports: Read more here. Canada to help lumber industry cope with US tariffs: Carney Prime Minister Mark Carney has announced that Canada will provide funds to help the lumber industry prepare for tariffs. Reuters reports: Read more here. Prime Minister Mark Carney has announced that Canada will provide funds to help the lumber industry prepare for tariffs. Reuters reports: Read more here. Starbucks under pressure again as Brazilian tariffs hike coffee costs Starbucks (SBUX) may soon hike prices on its pumpkin spice lattes and bottled Frappuccinos as it faces cost pressure from the 50% tariff on Brazilian coffee imports, which takes effect on Aug. 6. Yahoo Finance's Francisco Velasquez reports: Read more here. Starbucks (SBUX) may soon hike prices on its pumpkin spice lattes and bottled Frappuccinos as it faces cost pressure from the 50% tariff on Brazilian coffee imports, which takes effect on Aug. 6. Yahoo Finance's Francisco Velasquez reports: Read more here. EU continues to press for tariff exemption on wine, spirits as part of US deal The EU is pushing for its wine and spirit exports to be exempt from US tariffs, while both sides work towards refining the deal they agreed last month. The WSJ reports: Read more here. The EU is pushing for its wine and spirit exports to be exempt from US tariffs, while both sides work towards refining the deal they agreed last month. The WSJ reports: Read more here. Countries push for last-minute deals as Thursday tariff deadline looms Global importers are bracing for President Trump's next tariff deadline on Thursday morning, when the president's tiered approach to tariffs is expected to take effect. Yet some of the details around trade agreements remain fuzzy. Yahoo Finance's Ben Werschkul reports: Read more here. Global importers are bracing for President Trump's next tariff deadline on Thursday morning, when the president's tiered approach to tariffs is expected to take effect. Yet some of the details around trade agreements remain fuzzy. Yahoo Finance's Ben Werschkul reports: Read more here. Trump's copper tariffs apply to $15B of products so far President Trump's copper (HG=F) tariffs are due to hit imports valued at more than $15B in 2024, highlighting the potential inflationary impact on American manufacturers. Trump's unveiling of 50% import duties rattled the global copper market last week, because the US president provided a surprise exemption to key forms of wiring metal. But it still leaves significant trade volumes subject to tariffs. Bloomberg News reports: Read more here. President Trump's copper (HG=F) tariffs are due to hit imports valued at more than $15B in 2024, highlighting the potential inflationary impact on American manufacturers. Trump's unveiling of 50% import duties rattled the global copper market last week, because the US president provided a surprise exemption to key forms of wiring metal. But it still leaves significant trade volumes subject to tariffs. Bloomberg News reports: Read more here. Trump threatens EU with increased tariffs if it doesn't meet investment pledge President Trump threatened to hike tariffs on the European Union back to 35% if the bloc fails to live up to a pledge to invest some $600 billion in the US. "A couple of countries came [and said], 'How come the EU is paying less than us?' And I said well, because they gave me $600 billion," Trump said during a CNBC interview. "And that's a gift, that's not like, you know, a loan," he said, claiming that the terms allow the US to direct where the EU invests. 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President Trump said he would announce tariffs on semiconductor and pharmaceutical imports "within the next week or so." "We'll be putting a initially small tariff on pharmaceuticals, but in one year — one and a half years, maximum — it's going to go to 150%. And then it's going to go to 250%, because we want pharmaceuticals made in our country," Trump said during a CNBC interview. He said semiconductor and chip tariffs would be in a "different category." US tariff on EU goods set at flat 15% The EU said on Tuesday that European Union goods entering the US face a flat 15% tariff, including cars and car parts. The rate includes the Most Favoured Nation (MFN) tariff and won't exceed 15% even if the US raises tariffs on items like semiconductors and medicines. The EU said it still expects turbulence in its trade dealings with the US. Reuters reports: Read more here. The EU said on Tuesday that European Union goods entering the US face a flat 15% tariff, including cars and car parts. The rate includes the Most Favoured Nation (MFN) tariff and won't exceed 15% even if the US raises tariffs on items like semiconductors and medicines. The EU said it still expects turbulence in its trade dealings with the US. Reuters reports: Read more here. India hits back at Trump's tariff threat India has called out President Trump after he threatened to "substantially raise" tariffs on Indian exports over its Russian oil purchases, slamming the move as unjustified. New Delhi said it would take all necessary steps to protect its economic interests. Bloomberg News reports: Read more here. India has called out President Trump after he threatened to "substantially raise" tariffs on Indian exports over its Russian oil purchases, slamming the move as unjustified. New Delhi said it would take all necessary steps to protect its economic interests. Bloomberg News reports: Read more here. Nvidia partner Hon Hai's July sales growth weakened by tariffs Nvidia's (NVDA) main server assembly partner Hon Hai Precision ( reported a sales slowdown for July due to US tariffs. Bloomberg News reports: Read more here. Nvidia's (NVDA) main server assembly partner Hon Hai Precision ( reported a sales slowdown for July due to US tariffs. Bloomberg News reports: Read more here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
25 minutes ago
- Forbes
DeepSeek: A Paradigm Shift, What It Means For Humanity
The whale that is DeepSeek was invisible prior to Jan 20th 2025. Then the Blue Whale breaches to the whole world's sight on Jan 20th. That body slam sent shockwaves around the world. The release of DeepSeek-R1 immediately cratered the market cap of several hardware and software companies which were buoyed by what investors thought was American exceptionalism. Withholding the latest chips and AI Intellectual Property from China was thought to be the strategy to follow. Except it was wrong. Such is the stuff that leapfrogging is made of. Especially for manufacturing and design powerhouse such as China. Ironically, the latest models from DeepSeek are free to use. They even run it on their servers for free. Development of general purpose large language models through scaling of parameters and training data led to many breakthroughs. The release of ChatGPT-3.5 and 4.0 in 2022-23 unleashed the general purpose potential of AI to the general public. This approach also increased costs tremendously as compute and data demands spurred bigger and better processors. In late 2023 and 2024 and even now, the construction of power hungry data centers were thought to be the only way to improve the performance of the models. Limiting access to computing and the latest chips was thought to restrain China as a source of these powerful models. With DeepSeek that paradigm was shifted. Companies like Nvidia whose stock was heavily affected by the announcement have since recovered and thrived. The lessons were lost on global markets. The worst may yet to come as the companies buoyed by the rising of AI and its use are brought down to earth by a combination of new methods and the lessening of compute needed to do training as well as inference. Sunk costs and the costs of switching with their own powerful economic adherents prevent a longer term view and lock the American AI in their paths. Success breeds complacency and adherence to the model that produced success. In AI, a rapidly developing field, getting stuck on algorithms, process and practice is deadly. DeepSeek showed that just piling on computing and data does not make for exponential progress. This is a lesson from many fields, that is often ignored with an overused but wrong dictum 'This time it is different.' Innovation follows familiar patterns; slowly then rapidly. Efficiency The costs of training and running DeepSeek are much lower than for other models. The ratio in a recent presentation showed $6M for DeepSeek/ versus $600M for Llama (the open source model from Meta). One hundredth the cost. The costs for other models, including ChatGPT, are even more. The cost savings are a result of implementing DeepSeek's own discoveries in reinforcement learning and training using distillation. Further, the model is very efficient in generating Chinese language. As of three months ago, a large number of Chinese companies had joined the AI revolution by subscribing to DeepSeek. As the national champion, the government industrial policy supports DeepSeek. RL as a training method was invented in the University of Amherst. The recipients of the 2024 ACM Turing award, Andrew Barto and Richard Sutton were the inventors of the classic reinforcement learning techniques. For LLMs and other large models, such an approach falls under supervised learning. The model is refined by feedback, classically from humans, called RLHF (Reinforcement Learning with Human Feedback). This is called supervised fine- tuning. Humans are the supervisors. The paper released by the creators of DeepSeek R1 goes into detail on the way that they modified RL. Anything that involves humans in the loop at scale requires a lot of money. Removing the human in the loop makes training cheaper. A version of the model is used to fine-tune the other. In other words, one model functions as the supervisor and the other is trained. The arrival of new companies with models such as MiniMax-M1 epitomizes this shift even more. Such techniques will overtake models which are created using conventional scaling. DeepSeek-R1 was effective through its evolution utilizing multiple strategies. A combination of novel methods based on existing techniques made the training and inference efficient in time and resources. More details can be found in this article. In short, all aspects of the creation and running of large language models were changed, enhanced or reworked for cost and time efficiency. MiniMax-M1 MiniMax-M1 claims to have chopped the cost of DeepSeek-R1 training by 90%. They trained their model for a cost of $500K. Contrast this to the $6M cost for DeepSeek-R1 and $600M for LLaMa. There have been doubts cast on the numbers publicized by both DeepSeek and MiniMax. Efficiencies have been through further refining RL with what is called lightning attention. This is mostly for deterministic problems such as mathematical and logical reasoning and long context problems such as coding. Minimax is also available through HuggingFace the open source AI host. Privacy There is concern that DeepSeek is harvesting private data for its own use. This phenomenon is rife in the world of AI and social media in general. What makes the sharing of private data with DeepSeek or other private companies is the fact that they will be used to refine the models. In the case of DeepSeek or other China based companies, there is a fear of data reaching the Chinese government. Private AI companies, even those in the United States do the same, except they will share that data with the US government if they are forced by law. At this juncture, such a scenario is more disquieting. The fourth amendment will fall by the wayside, if the government can search not only our persons and our homes, but our minds without a warrant. To read more about the risks of DeepSeek, read this analysis from Hidden Layer. Since Hidden Layer's business model is based on these kinds of analysis, it is best to look closely at the analysis and compare with their work on other open models. Open Source AI Models Open Source International (OSI) has a definition of Open Source AI. It is 1.0 right now, subject to revision. Like the Open Source definition for software, it allows users to use, observe, modify and distribute without any restrictions. AI models depend a lot on their training data. AI use involves inference, consuming resources. The expenditure on training is separate from the expense of inference. In the classic definition of open source software the source code is available to any user to use, observe, modify and distribute. In a strict interpretation of AI open-source, the source code should include data used to train the model. However this may not be practical, nor is it part of the OSI definition of Open Source AI. This is drastically different from the OSI guidance for open source software. The other difference is the observability of the model weights and hyperparameters. During the learning phase model weights are refined. Model weights embody the model in its current form, crystallizing all the training that the model has undergone. Hyperparameters control the initial configuration of the learning setup. In an open model, model weights and model parameters are meant to be open. Open Source AI models can be called open weights models. Many models from China are open weights models, including Qwen (From AliBababa). This competition has also forced OpenAI to release an open weight model. This is the gpt-oss base model with two variants. The Future We have not delved into the technology behind the creation of multi-modal prompts and multi-modal generation. By multi-modal, we mean not only text, but images, audio as well as video. MiniMax as well as DeepSeek have these capabilities. It is clear that limiting access to hardware and know-how cannot hold true innovation back. Such constraints also make for multiple paradigm shifts, making AI cheaper to develop with lower hardware and power resources, creating democratized and decentralized future where we could fine-tune and run models on commodity hardware. These developments give us hope that we will be able to control and bend these capabilities to help humanity rather than harm ourselves.
Yahoo
an hour ago
- Yahoo
Trump claims Japan to import F-150s amid US tariff deal uncertainty
US President Donald Trump has reportedly said that Japan is set to begin importing Ford's F-150 pickup trucks, signalling a potential misunderstanding between the two nations regarding the specifics of a trade agreement proclaimed last month, according to Bloomberg. Tokyo's chief negotiator, Ryosei Akazawa, embarked on a trip to Washington with the intention of urging the Trump administration to honour its commitment to lower tariffs on automobiles and auto parts to 15% from the current 27.5%. Akazawa told reporters, 'It's worth noting that the US-UK agreement took 54 days to be implemented,' when discussing the anticipated reduction in auto tariffs upon his arrival in Washington. Speaking of Japan in a phone interview broadcast by CNBC, Trump stated: 'They're taking our cars. They're taking the very beautiful Ford F-150, which does very well. And I'm sure we'll do very well there and other things that do very well here, will also do well there.' The trade deal between the nations has been shrouded in uncertainty, raising concerns in Japan about its execution, especially concerning autos. The Trump administration's narrative on trade agreements has frequently been at odds with that of its trade partners, leading to questions about the agreements' effectiveness. Currently, the US imposes a 27.5% tariff on Japanese autos, a figure that combines an earlier 2.5% rate with a new 25% introduced by Trump. Although a reduction to 15% would alleviate some pressure, this rate would still affect the sector that is central to the Japanese economy. Optimism in Asian markets was evident as Akazawa made his ninth visit to the US, with Japan's Topix Index climbing 1%, buoyed by gains from automakers such as Toyota Motor. A point of contention remains whether the proposed 15% tariff will be an additional charge on top of current tariffs or if all current levies will be standardised to 15%, marking another potential area of misunderstanding between the two countries' interpretations of the trade deal. Despite Akazawa's assertion that tariffs will be capped at 15% and not added to existing rates, a recent executive order suggested that the 15% reduction would only apply to the European Union, not to Japan. Trump has often expressed frustration over the lack of popularity of US cars in Japan, but many experts believe this is due to the absence of models suited to the Japanese market, rather than trade barriers. The Ford F-150 mentioned by Trump may limit its practicality on Japan's narrower roads, where many are less than four metres wide for two lanes, as per government data from 2012. In the CNBC interview, Trump likened the $550bn investment package agreed upon with Japan in the trade deal to a "signing bonus". However, the Japanese have clarified that only a small fraction of this amount will constitute actual investment, with the remainder being loans and loan guarantees. Japan's Prime Minister Shigeru Ishiba has stated that these investments, driven by private companies, will serve the interests of both countries. "Trump claims Japan to import F-150s amid US tariff deal uncertainty – report" was originally created and published by Just Auto, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
