Key Points
- DeepSeek’s AI breakthrough has raised concerns about U.S. AI leadership. Its models claim to rival Western AI at a fraction of the cost.
- Microsoft and Meta defended their high AI spending, arguing that large-scale infrastructure is essential for future growth.
- Microsoft plans to spend $80 billion and Meta up to $65 billion on AI, while DeepSeek claims to have spent only $6 million.
- Microsoft shares fell 5% after forecasting slower Azure cloud growth. Meta reported a strong Q4 but issued a weak sales forecast.
Days after Chinese AI startup DeepSeek introduced a breakthrough in low-cost AI computing, U.S. tech giants Microsoft and Meta defended their massive AI investments, arguing that heavy spending is essential to maintaining their competitive edge.
DeepSeek’s rapid advancements have raised concerns about America’s AI leadership. The Chinese firm claims its models can rival or even outperform Western AI at a fraction of the cost. However, Meta CEO Mark Zuckerberg and Microsoft CEO Satya Nadella emphasized that building large-scale AI infrastructure is necessary to meet growing corporate demands.
“Investing heavily in infrastructure will be a strategic advantage over time,” Zuckerberg said in a post-earnings call. Similarly, Nadella stressed that spending is crucial to overcome capacity constraints that have limited Microsoft’s AI growth.
Microsoft has committed $80 billion to AI in its current fiscal year, while Meta has allocated up to $65 billion. In stark contrast, DeepSeek claims to have spent only $6 million developing its AI model—raising questions about the efficiency of U.S. investments.
Tech executives argue that DeepSeek’s figure likely reflects only computing costs rather than the full development expenses. However, some investors are growing impatient with the enormous spending and the lack of immediate returns.
Following Microsoft’s earnings report, its stock dropped 5% in extended trading after it forecasted slower growth for its Azure cloud business. “Investors want a clear roadmap for AI monetization,” said Brian Mulberry, portfolio manager at Zacks Investment Management. Meanwhile, Meta reported strong fourth-quarter results, but its weak sales forecast raised concerns about the profitability of AI-powered tools.
“U.S. tech giants are spending too much on AI without enough consumption,” said analyst Daniel Newman. Microsoft CFO Amy Hood stated that capital expenditures will remain around $22.6 billion per quarter, with a slower growth rate in fiscal 2026 compared to fiscal 2025. This suggests that cost efficiency will become a bigger focus while AI investments continue.