AI revenues won’t catch up to the scale of companies’ investments – analyst

[AI logo place on abstract blocks]
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Steve Levy, editor at large at Wired, warned that the massive capital investments pouring into artificial intelligence are unlikely to generate returns that match their scale anytime soon.

In an interview with CNBC, Levy characterized the spending spree by major technology companies as one of the most significant economic questions of our time, noting that the high valuations of these hyperscalers affect the broader market.

The scope of corporate spending on AI infrastructure has reached staggering levels, with companies going “all in” on building massive data centers.

OpenAI (OPENAI [https://seekingalpha.com/symbol/OPENAI]) is reportedly seeking to raise up to $50B this year to expand its cloud infrastructure operations, while Meta (META [https://seekingalpha.com/symbol/META]) and Microsoft (MSFT [https://seekingalpha.com/symbol/MSFT]) have both promised increased AI capital expenditures in their latest reports. Oracle (ORCL [https://seekingalpha.com/symbol/ORCL]) has similarly committed heavily to the buildout, reflecting an industry-wide belief that bigger investments will yield bigger breakthroughs.

Yet the market’s reaction to these expenditures has been inconsistent, swinging between optimism about companies being “serious” about AI and concern over when investors will see a payoff.

Levy observed that these tech giants have “pushed all their chips to the center of the table” on this bet, but whether it pays off depends on AI becoming deeply integrated into everyday life. The outcome remains uncertain, as success hinges on the premise that scaling up models and data centers will inevitably deliver results.

The industry’s strategy rests on what Levy described as a kind of technological “Valhalla”—a vision of abundance where AI solves major problems, as promoted by leaders like OpenAI’s (OPENAI [https://seekingalpha.com/symbol/OPENAI]) Sam Altman.

However, reaching this promised land requires AI to progress in ways that demand hundreds of billions of dollars in infrastructure investment. The risk is that the bet on technical scaling may not automatically translate into economic productivity.

Levy noted that a consensus is forming around a sobering reality: the revenue generated by AI will not justify the costs for years to come.

“Everyone’s pretty much come to the consensus that the revenues they get aren’t going to catch up, in a satisfying way to the scale of the investments or what these things cost,” he said. The concern is that multi-trillion-dollar companies could find themselves overextended if these investments fail to deliver.

Despite the financial uncertainty, Levy expressed confidence that the technology (AIQ [https://seekingalpha.com/symbol/AIQ]), (ARTY [https://seekingalpha.com/symbol/ARTY]), (ARKQ [https://seekingalpha.com/symbol/ARKQ]) itself will continue to advance.

He acknowledged that while the “payoff to overall economic growth” remains an open question, AI’s ongoing progress is “the biggest story of all.”

For investors and observers alike, the challenge lies in separating the volatility of markets from the steady march of technological evolution.

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