📰 Meta and Microsoft Double Down on AI, Despite DeepSeek Disruption
Meta and Microsoft continue massive AI investments to stay ahead as new, low-cost competitors emerge.
Mark Zuckerberg has made it clear: Meta is not slowing down its AI investments. Despite growing concerns over the potential impact of DeepSeek, Meta’s CEO pledged that the company will continue its aggressive AI strategy with hundreds of billions of dollars in spending over the long term. This includes a massive $65 billion earmarked for AI investments in 2025 alone.
Meta’s AI plans are built on heavy infrastructure spending, which Zuckerberg believes will provide a significant competitive advantage over time. In a post-earnings call, he explained that spending heavily on AI infrastructure isn’t just about staying competitive; it’s about building the capability to serve Meta’s billions of users effectively. He also reaffirmed that Meta is committed to making its open-source Llama models more competitive with closed systems like OpenAI’s GPT. The next iteration, Llama 4, is set to feature advanced multimodal capabilities and agentic features, further positioning Meta as a major player in the AI race.
Microsoft is following a similar path, committing $80 billion to AI in its current fiscal year. CEO Satya Nadella reinforced that the company’s large-scale investment is necessary to overcome the capacity constraints that have historically limited its ability to capitalize on AI. As AI becomes more efficient and accessible, the demand for it is expected to rise exponentially, and Microsoft aims to be ready for that surge.
While DeepSeek’s breakthrough technology has raised questions about whether the U.S. tech giants will continue to dominate AI, both Zuckerberg and Nadella remain optimistic. DeepSeek claims to have developed AI models that can perform at a similar level to Western competitors but at a fraction of the cost, sparking concerns that demand for certain chips, like those from Nvidia, might start to wane. However, Zuckerberg brushed off these fears, stating that it is still too early to predict whether demand for these chips will slow down, as they remain crucial for tasks like inference in AI applications.
Despite the excitement surrounding DeepSeek’s potential disruption, investors are beginning to ask whether the billions being spent on AI infrastructure are generating enough return. Shares of Microsoft dropped 5% in after-hours trading after the company’s latest earnings report revealed that growth in its Azure cloud business would fall short of expectations. Some investors, like Brian Mulberry of Zacks Investment Management, are looking for clearer signs of how these massive investments will translate into long-term profits.
Microsoft’s CFO, Amy Hood, confirmed that while the company’s capital expenditures for the next two quarters will remain at the $22.6 billion level seen in Q2, the growth rate of AI-related spending is expected to slow in fiscal year 2026. However, this doesn’t mean less spending overall; rather, the total spending will increase, but at a slower growth rate.
Both Microsoft and Meta are committed to their long-term AI strategies, and the companies continue to bet on their infrastructure investments as the key to staying ahead of new competitors like DeepSeek. As the competition heats up and demand for AI services skyrockets, these tech giants are preparing to make the most of the opportunities that lie ahead, despite the risks and challenges they may face along the way.
Source: Reuters, TechCrunch, Microsoft Investor Call
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