There's no denying that artificial intelligence (AI) is sweeping the tech industry right now as companies shift their attention toward this fast-growing market. And on the latest quarterly earnings calls, a handful of tech companies showed just how much attention they are giving to AI.
While executives sometimes use their earnings calls to puff up company plans, some recent comments from Nvidia (NVDA -3.33%), Microsoft (MSFT 0.37%), and Alphabet (GOOG 0.74%) (GOOGL 0.55%) carry more weight because these companies actually are making big strides in the AI market right now. Here's what they had to say and why it matters.
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Nvidia's AI data center opportunity
Nvidia is no stranger to the AI market. The company's graphics processors have been used by some of the largest tech companies to train AI and machine-learning services for years. In fact, Alphabet and Microsoft both mentioned Nvidia when talking about AI on their earnings call.
Nvidia's management highlighted the company's current AI focus on its call, saying that it achieved record data center revenue because of AI. Here's what Chief Financial Officer Colette Kress said about AI on the earnings call:
Our data center business achieved a record $9.9 billion in revenue for the year, up 124%, as we accelerated AI adoption across cloud, enterprise and edge computing.
We are investing heavily in R&D to drive the next wave of AI innovation and extend our leadership position.
A massive 124% increase in data center sales is extremely impressive considering that Nvidia isn't exactly a young tech start-up. And management's attributing the growth to AI shows just how big the company's opportunity could be in this space, considering that segment's sales make up more than half of the company's total revenue right now.
The company's shift to more research & development spending on AI could be money well spent. With so many tech companies needing high-powered servers that can handle complex AI processing, Nvidia should continue to see more demand in this space. And that should help the company tap into its total addressable market of $150 billion in AI.
Microsoft's AI bet is already paying off
Microsoft is arguably one of the leading AI companies right now after the company went all-in on OpenAI's large language model (LLM) chatbot, ChatGPT. The company had been a significant investor in OpenAI before ChatGPT was launched and has put about $13 billion into the start-up so far.
After ChatGPT was launched, Microsoft swiftly integrated the chatbot into its Bing search engine, as well as in Microsoft 365, its Azure cloud services, and its GitHub software development platform.
On its April 25 earnings report, management talked about its latest AI integrations. Here are a few comments from Microsoft CEO Satya Nadella:
Our Azure OpenAI Service brings together advanced models, including ChatGPT and GPT-4 ... we now have more than 2,500 Azure OpenAI Service customers, up 10X quarter-over-quarter.
Two months since the launch of new Bing and Edge, we're very encouraged by user feedback and usage patterns ... . Bing has more than 100 million daily active users.
Both of those comments point to some impressive AI-related growth for Microsoft, and Nadella said the company will continue to invest in AI to scale up for this new demand, "And we expect the resulting revenue to grow over time."
For Microsoft, that future revenue growth could come from the massive AI software market, which will be worth an estimated $850 billion by 2030, up from just $53 billion in 2021.
Alphabet is ramping up its AI focus
Alphabet was seemingly caught off guard when ChatGPT had its debut, and some have questioned why the company didn't move faster to implement AI capabilities into its existing services (more on that in a moment).
Here is a comment on AI from Alphabet's CEO, Sundar Pichai, on the latest call:
Last week, I announced that we're bringing together the Brain team in Google Research and DeepMind into one unit. Combining all this talent into one focused team, backed by the pooled computational resources of Google, will help accelerate our progress....
What was interesting to hear in Alphabet's earnings call was an underlying cautious tone when referring to AI. For example, Pichai said that the company will incorporate generative AI advances in Google search "in a thoughtful and deliberate way."
But while Pichai might have sounded a bit apprehensive about moving too quickly into AI, the company's recent developer event proved Alphabet certainly isn't resting on its laurels, either. The company said that it's implementing new AI features into its Workspace apps, Android operating system, and Google Cloud, and adding AI across 25 apps and services.
Most importantly, it's also adding more generative-AI responses to Google Search. The updated search tool will be able to handle more-complex queries and give specific answers to questions in a way that is more conversational.
The AI stakes are very high
What these comments from tech leaders show is that there is an intense focus on AI right now as companies jockey for the top spot.
The search market, long dominated by Alphabet's Google, is now seemingly up for grabs as Microsoft has implemented ChatGPT into its Bing search tool. There are already some indications that companies are willing to shift away from Google, considering that Samsung is reportedly considering switching its default search engine from Google to Bing.
While no one has won the AI race yet, there's certainly a lot at stake. Some of the latest estimates put the AI software market at a whopping $14 trillion by 2030.
This is going to create lots of competition in the coming years, and investors can expect all of these companies to continue to devote more attention and resources to this market and try to stay ahead of the curve.
