JPMorgan analyst Doug Anmuth expects tech giants - particularly members of the Magnificent Seven - to ramp up spending on capital expenditures (capex) in a big way.
Expect a tech arms race centered around AI advancements to heat up among Amazon.com Inc
"Our above consensus estimates assume AMZN/GOOGL/META capex grows +40-60% Y/Y in 2024 & +10%-30% in 2025," Anmuth said in a Tuesday note.
What's driving this massive spending spree? Anmuth believes it's all about positioning for long-term gains in generative AI (GenAI). There's no shortage of optimism here as each company starts to see early returns on investments, he adds.
Multiple companies suggest over 30% increases in "coding/engineering productivity from GenAI," Anmuth said.
And it's not just talk. AWS and Google Cloud are already generating significant revenues from AI services. Here's a breakdown:
- Amazon: The Seattle e-commerce company's AI business is "running at a ~$2B-$3B annualized revenue run-rate," Anmuth notes. According to CEO Andy Jassy, AI represents a "tens of billions of dollars" revenue opportunity. AWS is well-positioned to benefit, thanks to its "differentiated full-stack approach."
- Google: The excitement around "Google's AI Overviews in Search & Gemini" is expected to drive even more growth, according to Anmuth. "GOOGL's AI infra/GenAI products contributed billions of revenue in 1H," he says, pointing to a robust start to its AI monetization efforts.
- Meta: Anmuth highlights how "META's +23% FXN 2Q revenue growth benefited from AI-driven improvements to engagement & ad recommendations." The rollout of Meta AI and investments in business messaging are further solidifying its competitive position.
