Tech giants Microsoft and Google have splashed out on generative AI, with their cloud computing arms seeing a surge in demand as clients fork out for the pricey computing power that fuels the technology.
Microsoft has raced ahead in the AI game, pumping money into ChatGPT-maker OpenAI and pushing AI across products while others lag.
The company said sales soared to $62 billion for the October to December period, up 18 percent year-on-year and above the $61.1 billion expected by analysts.
The AI frenzy has helped Microsoft overtake Apple as the world’s biggest company by market value at more than three trillion dollars. The company’s share price is up 70 per cent from a year ago.
Microsoft’ resident Software King of the World Satya Nadella said “We’ve moved from talking about AI to applying AI at scale.”
Revenue for Microsoft’s Azure cloud services leaped by 30 per cent in the period, driven by the bigger computing needs that come with the adoption of AI.
Overall, Microsoft’s cloud services sales were up by 24 per cent, the company said.
“By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector,” Nadella said.
Google also thanked AI for boosting its profit in the same quarter.
Alphabet reported a profit of $20.7 billion on revenue of $86.3 billion, with strong contributions from video-sharing platform YouTube and its cloud computing unit.
Still mainly driven by ads, full-year revenue at Google reached $307.4 billion, up 8.7 percent from the previous 12 months.
Ads brought in a total of $65.5 billion in the quarter, compared with $59 billion in the same period the prior year.
While better than last year, this was lower than some market expectations and Google’s share price was sharply lower in after hours trading on Wall Street.
But sales in Google’s cloud-computing business climbed 26 per cent, supporting the company’s claim that it too is a major AI provider.
Google trails Microsoft and Amazon’s AWS, which are the world’s top providers of cloud computing services.
The search engine giant has quietly developed AI powers for years but was caught off guard when OpenAI in late 2022 released ChatGPT and teamed up with Microsoft to make its capabilities available to users worldwide.
Alphabet Chief Executive Sundar Pichai told an analyst call that his company’s newly developed Gemini AI model would deliver new capabilities across all products for the company.
Matching moves by Microsoft with its office tools, Google has already infused its Google search engine as well as GMail and other tools with AI’s powers.
