Cloud service providers may be cutting back on overall spending due to a shaky global economy and shrinking earnings, but they are boosting capex in one big area: artificial intelligence (AI).
On the heels of Microsoft and Alphabet earnings report this week, Counterpoint Research released new stats that show that spending on AI-related infrastructure is up across all of the major cloud providers, with Microsoft spending the most at 13.3% of its capex. Google follows with 6.8% of its capex spent on AI.
“Hyperscalers are increasingly focusing on ramping up their AI infrastructure in data centers to cater to the demand for training proprietary AI models, launching native B2C generative AI user applications, and expanding AIaaS (Artificial Intelligence-as-a-Service) product offerings," said Counterpoint Senior Research Analyst Akshara Bassi in a press release.
Meanwhile, Chinese cloud providers are lagging behind due to their inability to access key Nvidia GPU chips because of the U.S. ban on sending silicon to China combined with a slow Chinese economy.
See the charts below to get an idea of where the top nine cloud service providers are at with their AI-related capex spending, how they stack up against each other and how much they spend on IT overall.
The big spenders
Counterpoint estimates that approximately 35% of the total cloud capex for 2023 is earmarked for IT infrastructure including servers and networking equipment compared to 32% in 2022.
AI is expensive
Did you know that AI infrastructure can be 10 to 30 times more expensive than traditional general-purpose data center IT infrastructure, according to Counterpoint?
When the AI can mine for gold, cloud providers will be set. Until then, they will be spending the big bucks on keeping up with the demand for services like generative AI, which will in turn eat up their budgets. See below for the final chart of the bunch, which shows the billions of dollars spent on capex overall.
While cloud providers are spending big on AI infrastructure, the same cannot yet be said of enterprises. Gartner recently noted generative AI is "not yet significantly impacting [enterprise] IT spending levels." But once businesses do start spending, it'll likely be on AI that's incorporated into existing hardware, software and services, the analyst firm predicted.