Microsoft and Meta CEOs Justify AI Investment Following DeepSeek's Impact on the Industry

Days after the Chinese startup DeepSeek announced an innovative and cost-effective AI computing solution that surprised the U.S. technology sector, the CEOs of Microsoft and Meta defended their significant investments in AI as essential for maintaining competitiveness in the field.

DeepSeek's rapid advancements have raised questions about the United States' leading position in AI development. The models presented by DeepSeek claim to perform on par with or even exceed Western counterparts at significantly lower costs. In response, the U.S. CEOs asserted that establishing extensive computer networks is vital to meet increasing corporate demands.

"Investing very heavily in capital expenditure and infrastructure will provide a strategic advantage over time," remarked Meta CEO Mark Zuckerberg during a post-earnings conference call.

Similarly, Microsoft CEO Satya Nadella emphasized that their spending is crucial to overcoming capacity challenges that have limited the company's ability to harness AI's full potential. "As AI becomes more efficient and accessible, we will witness an exponential increase in demand," he stated in a call with analysts.

For its current fiscal year, Microsoft has allocated $80 billion for AI initiatives, while Meta has committed up to $65 billion towards similar technologies. In contrast, DeepSeek mentioned spending only around $6 million to develop its AI model. It's important to note that U.S. tech leaders and analysts argue that the amounts cited involve expenditures on computing power rather than comprehensive development costs.

Investor patience appears to be waning concerning the large expenditures without corresponding significant returns. After revealing that its Azure cloud business growth would fall short of estimates for the current quarter, Microsoft shares dropped by 5 percent in after-hours trading. "We need to see a clear roadmap for how all of the invested capital will translate into revenue," expressed Brian Mulberry, a portfolio manager at Zacks Investment Management.

Meta's recent performance has been mixed. The company reported a strong fourth-quarter result but offered a less-than-encouraging sales outlook for the upcoming period. “With these huge expenses, they need to start generating revenue, and this week signifies a wake-up call for the U.S. market,” commented Daniel Newman, an analyst at Futurum Group. "Currently, AI faces excessive capital outlay and insufficient consumption," he added.

However, there are signs that companies are transitioning their strategies. Microsoft CFO Amy Hood noted that the company intends to maintain its capital spending around the $22.6 billion level seen in the second quarter for this quarter and the next. "In fiscal 2026, we expect to keep investing, driven by robust demand signals. Nonetheless, the rate of growth will be lower than in fiscal 2025, which ends in June," she stated.

Microsoft, Meta, AI, Investment, DeepSeek