AI Spenders Get Spooked
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Who’s going to pay for the global AI build-out?
It’s a trickier question than it seemed just a few days ago. One answer has long been that hyperscalers such as Google and Meta could fund much of it out of their colossal profits.
Confidence in that scenario took a blow Wednesday when Google reported that its own AI offerings are bleeding growth from its cash-cow search ads, with monetization of AI-style queries still a work in progress. Google’s market capitalization shed $500 billion in the stock’s worst day ever, dragging down indexes that fell further as Intel and Amazon reported results that concerned investors.
There’s always Wall Street. But lenders and investors there are getting choosier about where to place their bets and are demanding tougher terms, my colleagues Peter Rudegeair, Robbie Whelan and Jack Pitcher reported.
Eagerness to crowd into the AI trade in any way possible has cooled as banks have raised concerns over exposure and data-center delays, while climbing interest rates have made debt offerings less attractive. Neo-clouds—the newer AI cloud providers—have been especially affected by the pullback, forcing some on the IPO track to delay or downsize offerings.
OpenAI has also had to pare its ambitions in a private funding round ahead of an expected IPO next year. It had been seeking $30 billion at a $1.4 trillion valuation but, as my colleague Berber Jin reported, it has raised less than half of that at a $1.25 trillion valuation.