Chip Stocks Boom As Google And Microsoft's Big Bets On AI Start Paying Off

Chip stocks like Nvidia, Arm Holdings and AMD climbed in premarket trading on Friday after tech titans Alphabet and Microsoft posted stellar earnings and hailed the opportunities of artificial intelligence, a sign Big Tech’s hefty bets on AI are starting to pay off and that the costly AI arms race will continue as firms vow to keep spending. Get Forbes Breaking News Text Alerts: We’re launching text message alerts so you'll always know the biggest stories shaping the day’s headlines. Sign up hereMicrosoft and Alphabet’s rapid pivot to artificial intelligence, which CEO Sundar Pichai has hailed as a “once-in-a-generation opportunity,” represents a broader embrace of the technology among Silicon Valley’s biggest players since the release of OpenAI’s ChatGPT in 2022. AI systems are costly to develop and run and Big Tech has been swift to embrace AI and pump billions into startups like Anthropic, OpenAI, Mistral and Inflection AI. In contrast, Wall Street has been more measured in its approach to AI and is more skeptical over whether such investments will pay off, particularly given the sizable outlays for something that does not always show a clear path to profit. Alphabet’s strong earnings have put it on track to become the world’s first company to exceed a $2 trillion market cap once markets open on Friday. Investor enthusiasm for Alphabet and Microsoft on Friday contrasts heavily with Facebook and WhatsApp parent Meta the day before. Shares nosedived after the company, primarily driven by ads, revealed strong earnings but warned growth would slow amid heavy investments in AI. Meta released its AI assistant, Meta AI, as a standalone tool last week, complementing its in-app tools on platforms like WhatsApp and Instagram. Driven by its powerful, new open source AI model, Llama 3, it is a clear effort to compete with standalone bots from other market leaders like OpenAI’s ChatGPT and Alphabet’s Gemini. CEO Mark Zuckerberg acknowledged the lack of a clear path to profit for the company’s AI tech but urged investors to bear with Meta as it builds, scales and eventually monetizes Meta AI. The process is in line with other products the company has launched, Zuckerberg said, stressing that he is certain the pivot to AI will pay off.
All data is taken from the source: forbes.com
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