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Microsoft and Meta Defend Heavy AI Investments Despite DeepSeek’s Low-Cost Advantage

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In response to the breakthrough low-cost AI models developed by Chinese startup DeepSeek, CEOs of Microsoft and Meta have defended their substantial investments in artificial intelligence, emphasizing that the heavy spending is essential to staying competitive in the rapidly growing field. DeepSeek’s claims of outperforming Western AI models at a fraction of the cost have sparked concerns over the U.S. tech industry’s dominance, but both executives stressed that building extensive computing infrastructures is crucial to meeting rising corporate demands.

Meta CEO Mark Zuckerberg highlighted the strategic advantage that heavy investments in capital expenditure and infrastructure will bring over time. Microsoft CEO Satya Nadella echoed this sentiment, stating that such investments are needed to address the capacity constraints that have limited the company’s ability to capitalize fully on AI opportunities. Nadella also noted that as AI becomes more efficient and accessible, demand for the technology will grow exponentially.

Microsoft has allocated $80 billion for AI in its current fiscal year, while Meta has committed up to $65 billion. This stands in stark contrast to the roughly $6 million that DeepSeek claims to have spent on developing its AI model. However, U.S. executives and analysts note that DeepSeek’s reported costs are limited to computing power, not including broader development expenses.

Despite these substantial investments, investor patience is waning. Microsoft shares dropped 6% after the company revealed that its Azure cloud business growth would fall short of third-quarter expectations. Brian Mulberry, portfolio manager at Zacks Investment Management, emphasized the need for a clearer path to monetizing the investments.

Meanwhile, Meta’s stock rose more than 4% following a strong fourth-quarter performance, though its first-quarter sales forecast was underwhelming. Analysts, like Daniel Newman from Futurum Group, pointed out the disparity between capital expenditure and revenue generation in the AI sector.

Both companies have indicated efforts to moderate spending. Microsoft CFO Amy Hood stated that capital expenditures for the third and fourth quarters would remain around $22.6 billion, similar to the previous quarter, with growth rate expectations for fiscal 2026 being lower than in fiscal 2025.

 

ABB Confident in Data Center Growth Despite DeepSeek’s Energy-Efficient AI

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ABB CEO Morten Wierod expressed confidence in the continued growth of the data center market, despite concerns over the impact of DeepSeek’s low-energy AI models. Speaking on Thursday after ABB reported its fourth-quarter results, Wierod reassured investors that demand for the company’s electrification products remains strong.

DeepSeek, a Chinese AI startup offering a more energy-efficient alternative to U.S. rivals, caused a selloff in tech stocks earlier in the week after surpassing OpenAI’s ChatGPT in downloads on Apple’s App Store. The AI model’s ability to operate with significantly fewer chips raised fears that it could reduce demand for data center infrastructure, impacting suppliers like ABB. ABB’s stock dropped nearly 6% on Monday amid these concerns.

However, Wierod said discussions with major partners and customers indicated that capital expenditure plans for data centers remain unchanged. ABB has significantly benefited from data center expansion, with its orders in this sector growing by an average of 23% per year between 2019 and 2023. The pace accelerated in 2024, with data center-related revenue now contributing 15% to ABB’s electrification business, up from 12% in 2023 and 8% in 2022.

While Wierod declined to provide a forecast for 2025, he emphasized ABB’s strong positioning in the industry, particularly in China. He also highlighted the company’s role in improving data center energy efficiency, an increasingly important factor as AI computing demand surges. ABB’s motors and variable speed drives can reduce electricity consumption by up to 60%, while its uninterrupted power supply systems operate at 97.4% efficiency when converting electricity.

The company also expects to benefit from the $500 billion AI infrastructure investment announced last week by U.S. President Donald Trump, reinforcing the long-term demand for data center solutions.

“The need for data centers and AI will be very strong in the coming years,” Wierod said. “I have no doubt.”

 

STMicroelectronics Cautious on 2025 Outlook Amid Weak Q1 Forecast

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STMicroelectronics (STMicro), one of Europe’s leading semiconductor manufacturers, announced on Thursday that it is too early to provide full-year guidance for 2025, as market uncertainties and inventory corrections continue to weigh on its business. The company warned that sales would decline further in the first quarter, reflecting a prolonged downturn in key markets.

STMicro’s stock fell 6.8% to 22.18 euros by 1226 GMT, hitting its lowest level since June 2020. CEO Jean-Marc Chery told analysts that the company expects the first quarter to mark the low point for 2025 but refrained from offering a full-year outlook due to limited visibility in demand recovery.

The company forecast first-quarter revenue of $2.51 billion, a nearly 28% year-over-year drop, falling short of analysts’ expectations of $2.72 billion, according to LSEG’s IBES data. This follows an earlier warning in November about a steeper-than-usual seasonal revenue decline.

The broader semiconductor industry is facing headwinds, with Texas Instruments, a key competitor, also reporting weak first-quarter projections due to inventory buildup in the automotive and industrial sectors.

To manage the downturn, STMicro plans to significantly reduce production days across its fabrication plants, assembly, and test facilities. Finance chief Lorenzo Grandi stated that some manufacturing sites would undergo temporary closures in the first quarter, with additional reductions likely extending into the second quarter.

Despite these challenges, STMicro reported fourth-quarter net income of $341 million, exceeding analysts’ estimates of $326 million. Strong performance in personal electronics partially offset declining industrial sector revenues.

For 2025, the company plans to scale back capital expenditures, targeting an investment of $2 billion to $2.3 billion, compared to $2.53 billion in 2024 and $4 billion in 2023.