Amazon, Google, Meta Bet Big On AI: Analyst Looks At Early Payoffs From GenAI Investments

JPMorgan analyst Doug Anmuth expects tech giants — particularly members of the Magnificent Seven — to ramp up spending on capital expenditures (capex) in a big way.

Expect a tech arms race centered around AI advancements to heat up among Amazon.com Inc AMZN, Google parent Alphabet Inc GOOG GOOGL, and Meta Platforms Inc META.

“Our above consensus estimates assume AMZN/GOOGL/META capex grows +40-60% Y/Y in 2024 & +10%-30% in 2025,” Anmuth said in a Tuesday note.

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What’s driving this massive spending spree? Anmuth believes it’s all about positioning for long-term gains in generative AI (GenAI). There’s no shortage of optimism here as each company starts to see early returns on investments, he adds.

Multiple companies suggest over 30% increases in “coding/engineering productivity from GenAI,” Anmuth said.

And it's not just talk. AWS and Google Cloud are already generating significant revenues from AI services. Here’s a breakdown:

• Amazon: The Seattle e-commerce company's AI business is “running at a ~$2B-$3B annualized revenue run-rate,” Anmuth notes. According to CEO Andy Jassy, AI represents a "tens of billions of dollars" revenue opportunity. AWS is well-positioned to benefit, thanks to its “differentiated full-stack approach.”
  
• Google: The excitement around “Google's AI Overviews in Search & Gemini” is expected to drive even more growth, according to Anmuth. “GOOGL's AI infra/GenAI products contributed billions of revenue in 1H,” he says, pointing to a robust start to its AI monetization efforts.
  
• Meta: Anmuth highlights how “META's +23% FXN 2Q revenue growth benefited from AI-driven improvements to engagement & ad recommendations.” The rollout of Meta AI and investments in business messaging are further solidifying its competitive position.

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