Latest news with #Layoffs
Hindustan Times
01-08-2025
- Business
- Hindustan Times
Big Tech's $400 Billion AI Spending Spree Drives Valuations to New Highs
The AI arms race is accelerating as the major tech companies add to their already gargantuan levels of spending . The bets are paying off for investors, but not for all employees. Alphabet's Google, Microsoft, Amazon and Meta Platforms are set to spend nearly $400 billion this year on capital expenditures, largely to build their artificial-intelligence infrastructure. That is more than the European Union spent on defense last year. Those firms and others plan to boost outlays even more. Morgan Stanley projects $2.9 trillion in spending from 2025 to 2028 on chips, servers and data-center infrastructure. The investments, the bank says, will contribute as much as 0.5% of U.S. GDP growth this year and next. The investments are helping power big increases in the companies' profits, pushing some of their share prices to records. Wall Street often looks down on excessive corporate spending. But not here. Microsoft and Meta shares soared Thursday after they reported earnings—and their sizable capital spending—reaching market capitalizations of $4 trillion and nearly $2 trillion, respectively. Also booming is Nvidia, which designs the chips that tech companies primarily use to build their AI models. It was the first company to surpass $4 trillion in market capitalization. Its shares are up more than 28% this year. Apple, another Magnificent Seven tech company, spends far less on AI and is facing Wall Street pressure to build up its capabilities. Investors say Apple needs to develop a convincing AI strategy of its own if it wants smartphone buyers to upgrade their devices faster. Companies are splurging because artificial intelligence promises to remake the lucrative tech market. The big tech companies want to be among the AI leaders. But AI requires intensive data-crunching, forcing tech companies to spend big on construction of new data centers. The recently passed One Big Beautiful Bill Act is expected to drive the spending even higher. It provides tax relief for companies that frontload investments, freeing up cash flow to increase spending even more. The infrastructure demands are so huge, though, that companies don't have enough cash to pay for the investments, according to Morgan Stanley, which estimates a $1.5 trillion financing gap. Already on the losing end are many of the companies' workers, nearly 100,000 of which have been laid off since 2022, according to tracking website Layoffs. Among them are software engineers, whose work is being rapidly replaced by AI. The AI investments are 'a tremendous hit on margins,' said Gil Luria, an analyst with D.A. Davidson. Tech company cost cutting, he said, is meant to soften the bottom-line blow. One risk for companies is whether their large investments will pay off. Luria says company profits haven't kept pace with their spending spree to date, though he is optimistic that increased productivity will ultimately justify the spending. Amazon shares fell 7% after-market Thursday because its latest quarterly results indicated its cloud business, which hosts AI models, isn't growing as fast as smaller rivals'. Chief Executive Andy Jassy expressed optimism the unit will perform better. Investors in AI startups like OpenAI aren't pressing the profitability issue yet, content to pour in more money so long as valuations keep rising. Other investors, however, have warned that the AI boom has become a speculative frenzy. Some companies say AI investments are benefiting their core business. Meta says it is leading to higher prices for ads and more usage of its apps. Tech companies' capital expenditures aren't all going to AI. Amazon also spends billions on capital to build up its logistics network. Yet AI investments are taking up a larger portion of its capital costs. One glaring exception to the AI boom is Apple, which spends a fraction of the other companies and finds itself lagging behind in AI. Late Thursday, Apple reported solid iPhone sales for its June quarter, with its shares increasing about 3% on the news. Inside Apple, some researchers are demoralized, say people familiar with their thinking. They struggle to get access to data to train next-generation AI models. The company takes privacy so seriously user data is highly protected, even internally. And Apple moves slowly, updating software running on its devices only a couple of times a year, compared with rivals who push updates often. Mark Zuckerberg is exploiting ennui inside Apple's AI unit, poaching disaffected engineers with pay packages that can run into the hundreds of millions of dollars, say people familiar with them. What Apple can point to is its efficiency. It generates far more in sales and profits from its capital outlays, compared with its rivals. And with a lean employee base, it has avoided large layoffs entirely. Write to Rolfe Winkler at Nate Rattner at and Sebastian Herrera at
Mint
01-08-2025
- Business
- Mint
Big tech's $400 billion AI spending spree drives valuations to new highs
The AI arms race is accelerating as the major tech companies add to their already gargantuan levels of spending. The bets are paying off for investors, but not for all employees. Alphabet's Google, Microsoft, Amazon and Meta Platforms are set to spend nearly $400 billion this year on capital expenditures, largely to build their artificial-intelligence infrastructure. That is more than the European Union spent on defense last year. Those firms and others plan to boost outlays even more. Morgan Stanley projects $2.9 trillion in spending from 2025 to 2028 on chips, servers and data-center infrastructure. The investments, the bank says, will contribute as much as 0.5% of U.S. GDP growth this year and next. The investments are helping power big increases in the companies' profits, pushing some of their share prices to records. Wall Street often looks down on excessive corporate spending. But not here. Microsoft and Meta shares soared Thursday after they reported earnings—and their sizable capital spending—reaching market capitalizations of $4 trillion and nearly $2 trillion, respectively. Also booming is Nvidia, which designs the chips that tech companies primarily use to build their AI models. It was the first company to surpass $4 trillion in market capitalization. Its shares are up more than 28% this year. Apple, another Magnificent Seven tech company, spends far less on AI and is facing Wall Street pressure to build up its capabilities. Investors say Apple needs to develop a convincing AI strategy of its own if it wants smartphone buyers to upgrade their devices faster. Companies are splurging because artificial intelligence promises to remake the lucrative tech market. The big tech companies want to be among the AI leaders. But AI requires intensive data-crunching, forcing tech companies to spend big on construction of new data centers. The recently passed One Big Beautiful Bill Act is expected to drive the spending even higher. It provides tax relief for companies that frontload investments, freeing up cash flow to increase spending even more. The infrastructure demands are so huge, though, that companies don't have enough cash to pay for the investments, according to Morgan Stanley, which estimates a $1.5 trillion financing gap. Already on the losing end are many of the companies' workers, nearly 100,000 of which have been laid off since 2022, according to tracking website Layoffs. Among them are software engineers, whose work is being rapidly replaced by AI. The AI investments are 'a tremendous hit on margins," said Gil Luria, an analyst with D.A. Davidson. Tech company cost cutting, he said, is meant to soften the bottom-line blow. One risk for companies is whether their large investments will pay off. Luria says company profits haven't kept pace with their spending spree to date, though he is optimistic that increased productivity will ultimately justify the spending. Amazon shares fell 7% after-market Thursday because its latest quarterly results indicated its cloud business, which hosts AI models, isn't growing as fast as smaller rivals'. Chief Executive Andy Jassy expressed optimism the unit will perform better. Investors in AI startups like OpenAI aren't pressing the profitability issue yet, content to pour in more money so long as valuations keep rising. Other investors, however, have warned that the AI boom has become a speculative frenzy. Some companies say AI investments are benefiting their core business. Meta says it is leading to higher prices for ads and more usage of its apps. Tech companies' capital expenditures aren't all going to AI. Amazon also spends billions on capital to build up its logistics network. Yet AI investments are taking up a larger portion of its capital costs. One glaring exception to the AI boom is Apple, which spends a fraction of the other companies and finds itself lagging behind in AI. Late Thursday, Apple reported solid iPhone sales for its June quarter, with its shares increasing about 3% on the news. Inside Apple, some researchers are demoralized, say people familiar with their thinking. They struggle to get access to data to train next-generation AI models. The company takes privacy so seriously user data is highly protected, even internally. And Apple moves slowly, updating software running on its devices only a couple of times a year, compared with rivals who push updates often. Mark Zuckerberg is exploiting ennui inside Apple's AI unit, poaching disaffected engineers with pay packages that can run into the hundreds of millions of dollars, say people familiar with them. What Apple can point to is its efficiency. It generates far more in sales and profits from its capital outlays, compared with its rivals. And with a lean employee base, it has avoided large layoffs entirely. Write to Rolfe Winkler at Nate Rattner at and Sebastian Herrera at
Yahoo
24-06-2025
- Business
- Yahoo
Microsoft's Focus Is Shifting-Xbox Braces for Deeper Cuts
Looks like Xbox is in for another round of pink slips next weekmanagers are bracing for more cuts on top of the 6,000 roles Microsoft (NASDAQ:MSFT) trimmed in May and the 300 it axed this month. Bloomberg hears the layoffs will touch studios and support teams across the board, as Redmond shifts those headcount dollars into its big AI push. Warning! GuruFocus has detected 6 Warning Sign with MSFT. It's a classic trade-off: pour more cash into next-gen machine smarts or keep pumping out gaming content? Microsoft's already said it's retooling sales roles to bankroll these AI bets, so Xbox is feeling the squeeze. We'll want to watch for any official word from the company (and what Satya Nadella's next earnings call reveals) to see if fans and investors think the gamble will pay offor if it leaves Xbox's creative engine running on fumes. This article first appeared on GuruFocus.
Yahoo
19-06-2025
- Business
- Yahoo
Microsoft (MSFT) Reportedly Plans Thousands of Job Cuts in Sales Teams
June 19 - Microsoft (NASDAQ:MSFT) is preparing to eliminate thousands of jobs in its sales division as it approaches the end of its fiscal year, Bloomberg reported on Wednesday, citing sources familiar with the matter. Warning! GuruFocus has detected 6 Warning Sign with MSFT. The reductions are expected to be disclosed in early July, shortly after the company closes its fiscal year at the end of June, according to the report. The layoffs will reportedly affect roles across sales functions, especially those serving small and medium-sized business clients. Back in April, Microsoft informed some teams it would begin shifting segments of its SMB software sales to external vendors, signaling broader organizational changes. In May, reports surfaced that Microsoft aimed to cut around 6,000 jobs, or nearly 3% of its global workforce, as part of broader restructuring. A company spokesperson said the changes were intended to help Microsoft adapt to a dynamic marketplace. Tech sector layoffs have slowed in 2025, but Microsoft and Intel (NASDAQ:INTC) remain among the biggest job cutters so far. Data from shows that 141 tech companies have cut nearly 62,832 jobs year to date. This article first appeared on GuruFocus. Sign in to access your portfolio
