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By Jasmine Laws
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Big tech companies have increased their spending on infrastructure as the demand for artificial intelligence (AI) continues to expand.
Amazon, Google, Meta and Microsoft expanded such investments by 81 percent year over year during the third quarter of 2024, according to an analysis by business consultancy Dell'Oro Group, and are on track to have spent $180 billion on data centers and related costs by the end of the year.
The push to expand and develop infrastructure among major technology companies is believed to have been prompted by the goal to enhance AI model training, the Dell'Oro Group said. AI investment requires data centers because they provide the computational infrastructure needed to train, deploy, and manage AI systems.
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It was found that the three largest public cloud providers, Amazon Web Services (AWS), Azure and Google Cloud, each had a spike in their investment in AI during the third quarter of this year.
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Alistair Speirs, senior director of Azure Global Infrastructure at Microsoft told Newsweek: "Microsoft's datacenter construction has been accelerating for the past few years, and that growth is guided by the growing demand signals that we are seeing from customers for our cloud and AI offerings.
"As we grow our infrastructure to meet the increasing demand for our cloud and AI services, we do so with a holistic approach, grounded in the principle of being a good neighbor in the communities in which we operate."
The cloud refers to a network of remote servers hosted on the internet that store, manage, and process data, rather than relying on a local computer or on-premises servers. It's a metaphor for accessing computing resources and services over the internet.
Companies can opt to pay to access their files and computing power through a cloud instead of investing in databases and hardware, so the cloud also offers companies data analytics, AI, and applications for business functions, according to oracle.com.
AI is important for enhancing cloud computing, and cloud computing provides the necessary infrastructure for AI, per the oracle.com report, so the two go hand in hand and AI integration in cloud computing has become a major source of investment of tech companies.
Baron Fung, a senior director at Dell'Oro Group, told Newsweek: "We think spending on AI infrastructure will remain elevated compared to other areas over the long-term. These cloud providers are spending many billions to build larger and more numerous AI clusters."
He said that "the larger the AI cluster, the more complex and sophisticated AI models that can be trained."
"Applications such as Copilot, chatbots, search, will be more targeted to each user and application, ultimately delivering more value to users and how much end-users will pay for such a service," he added.
He also said that in addition to AI training infrastructure, "there's growing investments on the inference side as well, in order to facilitate the vast number of queries from users in a timely manner."
He added that the Cloud providers are also "building the AI training and inference infrastructure to rent out to end-users in the public cloud so they can develop their own applications."
Another indication of the expanding AI market was the increase in revenue experienced by Nvidia, the computer chip designer that dominates the market in providing the chips needed for AI systems.
The company saw its revenues increase by 94 percent at the end of October as it tried to meet the high demand for its chips that are used for AI, its chief financial officer said in the third quarter earnings call last month.
In September, another Dell'Oro Group report also found cloud companies' investment in infrastructure drove server and storage system component markets up by 127 percent in the second quarter of this year, hitting a record high.
Update 12/06/24, 03:40 a.m. ET: This article has been updated with comment from Alistair Speirs and Baron Fung.
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