Big Spending, Uneven Payoff
Microsoft and Alphabet both posted huge AI cloud numbers this week, but the payoff from all that spending is pretty uneven. Microsoft’s revenue rose 19% and profit jumped 32%, with Azure up 48% — and free cash flow stayed positive despite $45.2 billion in quarterly capital spending (and buyout offers to about 60,000 workers). Alphabet grew revenue 25% on a 103% jump in Google Cloud, but profit fell and cash flow went negative as it plans to spend even more. Search growth slowed too, and Google admitted AI searches earn less than traditional ones. Its fix? More ads.
Investors were already bracing for the bill, and the results made for a tale of two hyperscalers — though the Journal argues Alphabet still has the ingredients to win if the AI spending pulls back. So demand isn’t the problem. Turning it into durable returns is.
Anthropic’s $2 Trillion Test
Anthropic is gearing up for a stock-market debut that’ll test just how much investors believe in the AI boom. The New York Times reports a potential $2 trillion valuation, against first-half revenue of $16.3 billion and losses of $80.7 billion. (Yes, losses roughly five times revenue.) The Journal pegs the range at $1.5 trillion to $2 trillion — and even calls the IPO a national-security win for Taiwan — while TechCrunch cites a $965 billion private valuation.
The pitch is big: Anthropic points to more than $40 trillion in knowledge work as its potential opportunity — though, as the Journal notes, that’s not a sales forecast. And VCs aren’t the only winners. TechCrunch reports Amazon and Google could cash in on both equity and major cloud contracts. With Big Tech on track to spend $700 billion on AI infrastructure this year, a lot of these bets need to pay off.
Apple’s Suppliers Get Even
AI is handing Apple’s chip suppliers some long-awaited leverage. Data-center demand has pushed flash-memory prices up roughly 550% since 2023, and hyperscalers now buy twice as much of the market as Apple does. The Wall Street Journal projects Apple will spend $25 billion on flash storage this year, up from $6 billion in 2025 for about the same volume. That could squeeze the profits Apple makes on storage upgrades, while suppliers like Kioxia use the moment to charge more and lock in longer contracts.
After years of Apple calling the shots, the tables have turned.
Other Links
- TechCrunch: Anthropic just launched tools to show companies what their AI spending is buying
- TechCrunch: Mistral releases weights for its trillion-parameter AI model, targeting cybersecurity
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- WSJ: The Morning Risk Report: Tech, Social Media Companies Brace for Deepfake Scrutiny in Midterms Run-Up
- NY Times: Nvidia Chief, Jensen Huang, Is Seen as Target of Chinese Spy Plot
- WSJ: America Needs a 911 Line for Cybersecurity
- NY Times: ChatGPT’s Advice to Cut Her Seizure Drug Led to Devastating Consequences
- NY Times: A Top Dartmouth Leader Steps Down Over Undisclosed A.I. Use in Writings
- Google: Gemini 4 Carbon: our next frontier model
- WSJ: Chip Maker STMicroelectronics Projects Robust Sales Growth on Data Center Demand