Microsoft, Meta CEOs defend AI spending after DeepSeek stuns tech world

The Deepseek logo is seen in this illustration. Source: Reuters/Dado Ruvic

"Investing 'very heavily' in capital expenditure and infrastructure is going to be a strategic advantage over time," Meta CEO Mark Zuckerberg said on a post-earnings call.

Satya Nadella, CEO of Microsoft, said the spending was needed to overcome the capacity constraints that have hampered the technology giant's ability to capitalise on AI.

"As AI becomes more efficient and accessible, we will see exponentially more demand," he said on a call with analysts.

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Microsoft has earmarked $80bn for AI in its current fiscal year, while Meta has pledged as much as $65bn towards the technology.

That is a far cry from the roughly $6m DeepSeek said it has spent to develop its AI model. US tech executives and Wall Street analysts say that reflects the amount spent on computing power, rather than all development costs.

Still, some investors seem to be losing patience with the hefty spending and lack of big payoffs.

Share sell off

Shares of Microsoft — widely seen as a front runner in the AI race because of its tie to industry leader OpenAI — were down 5% in extended trading after the company said that growth in its Azure cloud business in the current quarter would fall short of estimates.

"We really want to start to see a clear road map to what that monetization model looks like for all of the capital that's been invested," said Brian Mulberry, portfolio manager at Zacks Investment Management, which holds shares in Microsoft.

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Meta, meanwhile, sent mixed signals about how its bets on AI-powered tools were paying off with a strong fourth quarter but a lacklustre sales forecast for the current period.

"With these huge expenses, they need to turn the spigot on in terms of revenue generated, but I think this week was a wake-up call for the U.S." said Futurum Group analyst Daniel Newman.

"For AI right now, there's too much capital expenditure, not enough consumption."

There are some signs though that executives are moving to change that.

Microsoft CFO Amy Hood said the company's capital spending in the current quarter and the next would remain around the $22.6 billion level seen in the second quarter.

"In fiscal 2026, we expect to continue to invest against strong demand signals. However, the growth rate will be lower than fiscal 2025 (which ends in June)," she said.