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In the race to build AI, the tech plans a big plumbing upgrade| GuyWhoKnowsThings


If 2023 was the year of the AI ​​chatbot in the tech industry, 2024 is turning out to be the year of the AI ​​plumbing. It may not sound all that exciting, but tens of billions of dollars are quickly being spent on technology behind the scenes for the industry's AI boom.

Companies from Amazon to Meta are revamping their data centers to support artificial intelligence. They are investing in huge new facilities, while even places like Saudi Arabia They are racing to build supercomputers to handle AI. It seems that almost everyone with a foot in technology or large amounts of money is entering a spending frenzy that some believe could last for years.

Microsoft, Meta and Google parent company Alphabet revealed this week that they had spent more than $32 billion combined on data centers and other capital expenditures in just the first three months of the year. All of the companies said in calls with investors that they had no plans to reduce their spending on AI.

In the clearest sign of how AI has become a story about building massive technological infrastructure, Meta said Wednesday that need to spend billions more in chips and data centers for AI than it had previously noted.

“I think it makes sense to do it, and we will do it,” Meta CEO Mark Zuckerberg said on a call with investors.

The eye-popping spending reflects an old Silicon Valley parable: The people who made the biggest fortunes during the California gold rush were not the miners, but the people who sold the shovels. Certainly Nvidia, whose chip sales have more than triple over the last year, it is the most obvious winner in AI.

The money pouring into technology to support artificial intelligence is also a reminder of the spending patterns of the dot-com boom of the 1990s. For all the excitement around web browsers and newfangled e-commerce websites, the companies making the real money were software giants like Microsoft and Oracle, chip maker Intel, and Cisco Systems, which made the computers that They connected these new computer networks.

But cloud computing has added a new aspect: Since most startups and even large companies in other industries hire cloud computing providers to host their networks, the largest companies in the technology industry are spending a lot now in the hope of attracting customers.

Google's capital expenditures (largely the money that goes into building and equipping data centers) almost doubled in the first quarter, the company said. Microsoft rose 22 percent. Amazon, which will report results on Tuesday, is expected to contribute to that growth.

Meta investors were unhappy with Zuckerberg, causing his company's stock price to drop more than 16 percent after the call. But Zuckerberg, who just a few years ago was ridiculed by shareholders for an excessive spending plan on augmented and virtual reality, did not apologize for the money his company is spending on AI. He asked for patience, potentially for years.

“Our optimism and ambitions have increased quite a bit,” he said.

Investors had no problem supporting Microsoft's spending. Microsoft is the only major technology company to report financial details of its generative artificial intelligence business, which it said had contributed to more than a fifth of the growth of its cloud computing business. That amounted to $1 billion in three months, analysts estimated.

Microsoft said its generative AI business could have been even larger if the company had enough data center supply to meet demand, underscoring the need to keep building.

Investments in AI are creating a halo for Microsoft's core cloud computing offering, Azure, helping it attract new customers. “Azure has become a reference point for virtually anyone doing any AI project,” Microsoft CEO Satya Nadella said Thursday.

(The New York Times defendant Microsoft and its partner, OpenAI, alleged copyright infringement of news content related to their artificial intelligence systems in December).

Google said its cloud division's sales rose 28 percent, including “a growing contribution from AI.”

in a letter Speaking to shareholders this month, Amazon CEO Andy Jassy said there had been a lot of focus on AI applications, such as ChatGPT, but that the opportunity for more technical efforts, around infrastructure and data, It was “gigantic.”

For computing infrastructure, “the key is the chip on it,” he said, emphasizing that reducing costs and getting more performance out of chips is key to Amazon's success. effort to develop its own AI chips.

Infrastructure demands generally fall into two categories: First, there is building the largest, most cutting-edge models, which some AI developers say could soon exceed a billion dollars for each new round. CEOs said being able to work on developing cutting-edge systems, either directly or with partners, was essential to staying at the forefront of AI.

And then there is what is called inference or consulting the models to actually use them. This may involve customers accessing systems, such as an insurer using generative AI to summarize a customer complaint, or companies themselves putting AI directly into their own products, such as Meta recently did integrating a chatbot assistant on Facebook and Instagram. That's expensive too.

Data centers take time to build and equip. Chips face supply shortages and costly manufacturing. Betting on the long term, Susan Li, Meta's chief financial officer, said the company was building with “fungibility.” She wants leeway to change how she uses infrastructure, if the future turns out not to be exactly what she expects.


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