Amazon, Microsoft and Google parent Alphabet look set to ramp up capital spending, as the world’s biggest cloud computing groups build up capacity to serve the growth of generative artificial intelligence. The Big Tech groups, which together dominate the global cloud market, have boosted investment in computing infrastructure over the past few years. Capital spending rose to a combined $42bn in the three months to September, almost 20 percent more than the same period in 2021. That figure, which comprises reported corporate capex from Alphabet and Microsoft and Amazon’s businesswide investment in property and equipment, marked a 10 percent rise from the quarter to June. Analysts expect the pace of cloud-related spending to accelerate next year. Executives from the companies said last month that significant chunks of capital spending are going towards the generative AI systems that require huge amounts of computing power and data-crunching. Amazon chief executive Andy Jassy predicted that generative AI will drive “tens of billions in revenues”. The three tech giants are vying to increase their shares of the cloud market — the business drives Amazon’s overall profits in particular — and must remain competitive in AI to hold on to their customers. Each wants to win new customers with a suite of state of the art AI tools and services, and use the technology to enhance other core products. The rivals “have to compete on generative AI or they’ll lose relevance and market share”, said Jeff Pearson, managing director at technology consultancy Slalom. “All that is going to require a tremendous amount of capex”, for equipment such as servers and data centres.
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