San Francisco – Days after Chinese AI startup DeepSeek unveiled a breakthrough in low-cost artificial intelligence computing, Microsoft and Meta defended their aggressive spending in the sector, arguing that large-scale infrastructure investments remain critical for maintaining a competitive edge.
DeepSeek’s rapid progress has sparked concerns that the U.S. may be losing its AI lead. The company claims its AI models match or surpass Western counterparts while operating at a fraction of the cost. In response, top U.S. tech executives insisted on Wednesday that massive computing investments were essential to serve growing demand and overcome capacity constraints.
“Investing very heavily in capital expenditure and infrastructure is going to be a strategic advantage over time,” said Meta CEO Mark Zuckerberg in a post-earnings call.
Microsoft CEO Satya Nadella echoed that sentiment, saying the company’s $80 billion AI budget for the current fiscal year was necessary to support the industry’s evolving needs. “As AI becomes more efficient and accessible, we will see exponentially more demand,” Nadella told analysts.
DeepSeek’s Low-Cost AI Sparks Investor Concerns
The spending contrast between U.S. tech giants and DeepSeek is stark. While Meta has committed up to $65 billion toward AI development, DeepSeek reported spending just $6 million to develop its cutting-edge AI model. While analysts suggest this figure reflects only computing costs—not total development expenses—it has nevertheless raised questions about whether U.S. companies are overspending on AI without seeing immediate financial returns.
Investor skepticism was evident on Wall Street. Microsoft’s stock dropped 5% in extended trading after the company warned of slower-than-expected growth in its Azure cloud business. Some shareholders are pressing for a clearer path to profitability.
“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 Microsoft shares.
Meta, meanwhile, posted strong fourth-quarter results but issued a weaker-than-expected sales forecast for the current period, adding to concerns about whether AI investments are translating into revenue growth.
Shift in Spending Strategy?
Despite the spending frenzy, some tech executives signaled a shift toward more controlled investments.
Microsoft CFO Amy Hood stated that capital expenditures would remain around $22.6 billion per quarter through mid-2025. However, she suggested that growth rates would slow in fiscal 2026, hinting at a more measured approach to AI spending moving forward.
As pressure mounts from both competitors and investors, U.S. tech giants now face the challenge of proving that their massive AI investments will pay off in real-world applications and financial returns—before the gap between cost and consumption grows too wide.
