Tech CEOs praise AI, but revenue growth will take time. Microsoft Corp (MSFT.O) and Alphabet Inc (GOOGL.O) praised AI investments for the second quarter, but their Tuesday results showed sluggish revenue growth.
Generative AI from tech titans creates new text, graphics, and code from existing data. Microsoft-powered OpenAI’s ChatGPT chatbot popularized the phrase. “The world’s most advanced AI models are coming together with the world’s most universal user interface – natural language – to create a new era of computing,” Microsoft CEO Satya Nadella said Tuesday.
Reuters discovered that S&P 500 (.SPX) corporations’ quarterly conference calls used “AI” twice as much as the previous quarter. Google used it 52 times on Tuesday’s first-quarter conference, up from 45 in the fourth. Microsoft said it 36 times, OpenAI 20.
Both companies claimed AI increased sales, but neither disclosed AI sales, costs, or profits. “Lots more to come,” Alphabet CEO Sundar Pichai said on Tuesday after noting last month’s offerings, including Bard, Google’s ChatGPT-powered search chatbot.
Google reported quarterly earnings and revenue beyond expectations and a $70 billion stock repurchase.
Last week, it said it would join Google Brain and DeepMind to create “multimodal” AI like OpenAI’s GPT-4, which creates new content from text and visual recommendations.
“The announcements are there, and things will move rapidly.” But, it’ll take time to see real meaty results,” said Globalt Investments senior portfolio manager Thomas Martin.
“As far as working it into actual numbers… think about how long it took Google to break out YouTube just as an example,” he said, adding that nothing important would appear on statements for over a year.
Microsoft’s investor relations head, Brett Iversen, told Reuters that “it’s early” and that AI was a small part of Microsoft.
In three months, 10,000 companies, including Coca-Cola (KO.N) and General Motors (GM.N), have signed up for Microsoft’s AI “Copilot” development platform, Nadella said. Word, Excel, and Outlook also use it.
Microsoft’s cloud computing and Office productivity software divisions exceeded Tuesday’s quarterly sales and profit estimates. Nadella said AI features had raised Bing downloads and daily users to 100 million.
“Ultimately, it may be much larger impact to Microsoft’s enterprise software and perhaps less so in search,” said Madison Investments portfolio manager Haruki Toyama.
Toyama said Google had used AI to commercialize search engines and did not expect competing AI advances to be problematic. Amazon.com Inc (AMZN.O) reports next week, while Meta Platforms Inc (META.O) reports Wednesday.
Meta, which admits it is behind in AI, developed an image object recognition model. As a result, AWS, the world’s largest cloud provider, now offers AI-powered chatbot development tools. Meta rose 2.3% and Amazon 5.3% Tuesday after the market.
