Tech’s AI Spending Is ‘Greatest Capital Misallocation in History’: Gary Marcus
Gary Marcus think Big Tech firms are dumping way too much money into AI.
Marcus, a longtime AI researcher, author, and professor emeritus at New York University, took Wednesday’s earnings bonanza as an opportunity to criticize hyperscalers’ capex spending plans, taking aim at Alphabet, Amazon, Meta Platforms and Microsoft, all of which are spending massively to further their AI ambitions.
“Greatest capital misallocation in history” he wrote in a Thursday post on X, describing the company’s AI capex plans.
Marcus highlighted the four companies’ history of AI spending, highlighting the trend of the four top hyperscalers setting records with each earnings report since 2022. Wall Street, in turn, has mostly continued to reward these companies, though some signs of fatigue have begun to show in recent quarters.
“Amazon, Google, Microsoft, and Meta collectively are spending more money than the Manhattan Project every single month,” he stated. “More than 12x the Manhattan Project every year.”
Meta CEO Mark Zuckerberg has reiterated that spending billions is a necessary cost to avoid being late to the superintelligence phase of the AI boom. But as Marcus noted, until that happens, such high spending levels aren’t yielding much for investors so far.
“None are making major profits on AI,” he said. “None has a technical moat; a massive price war is inevitable. And few of their customers are seeing major returns on investment.”
Marcus has warned about the danger AI mania poses for investors before. In February, as the AI trade struggled amid unexpected disruptions, he said that the struggles of the tech sector at the time showd that investors were realizing they had been sold a “bill of goods” with regard to AI.
“My guess is that these stocks — and the reputation of OpenAI — will fall further, but either way it is already clear that the rockets will not reach the altitude so many people were hoping for,” Marcus wrote.
Some of those concerns were reignited this week by a report from The Wall Street Journal that said OpenAI had missed som key targets for revenue and user growth last year. Tech shares tumbled in the session as investors grappled with the possibility of a demand slowdown.
