US Big Techs Defend Heavy AI Investments Amidst DeepSeek’s AI Advancement

U.S. tech giants Microsoft and Meta have defended their massive AI investments in the wake of DeepSeek’s cost-effective AI breakthrough, Reuters has reported. DeepSeek’s AI advancement has raised concerns about America’s dominance in the AI race following claims that its AI model can match or even surpass Western counterparts at a fraction of the cost.

Too Early to Assess Impact

Zuckerberg said that it’s still early to know how much DeepSeek’s quick progress will affect his company and tech industry at large. However, he dismissed that Meta’s AI spending will reduce due to DeepSeek’s alleged claim that its AI technology costs less.

“It’s probably too early to really have a strong opinion on what this means for the trajectory around infrastructure and CapEx. There are a bunch of trends that are happening here all at once,” Zuckerberg said.

Meta’s sales revenue rose by 21% to hit the $48.39 billion mark. The big tech’s stocks rose by close to 2% on January 27, an indication that some investors believe that the social media giant can develop powerful AI systems in a much more cost-efficient manner.

Zuckerberg added that his company is still studying some of the features in DeepSeek and will eventually take up some of the advancements in the Chinese AI startup for its projects.

Maintaining AI Competitiveness

CEOs of both Microsoft and Meta said their heavy AI spending is important in maintaining their competitiveness in the dynamic field. Chief Executives from the two tech giants hold that setting up big computer networks is critical in meeting their corporate needs.

“Investing ‘very heavily’ in capital expenditure and infrastructure is going to be a strategic advantage over time,” Meta CEO Mark Zuckerberg said in a post-earnings call.

Microsoft argued that it was necessary to spend on AI to overcome the capacity challenges that have continued to hamper the ability of tech giants to leverage the technology.

“As AI becomes more efficient and accessible, we will see exponentially more demand,” Microsoft CEO Satya Nadella said.

In the current financial year, Meta has committed to spend $65 billion on AI. Microsoft’s AI investment this year will be $80 billion. These amounts are by far much more than the $6 million that DeepSeek claimed that it spent on its AI model. Wall Street analysts and tech executives say DeepSeek’s estimates only reflect their computing power spending as opposed to the overall development costs.

Investor Perspectives

Some investors appear to be getting tired of big AI spending without corresponding returns. Microsoft shares dipped 5% after it reported slow growth in its Azure cloud business unit.

“We really want to start to see a clear road map to what that monetization model looks like for all of the capital that’s been invested,” Brian Mulberry of Zacks Investment Management said.

The Windows maker is considered a front runner in the AI race due to its ties with OpenAI. Microsoft will be maintaining a capital spending of about $22.6 billion in quarters one and two of 2025.

“In fiscal 2026, we expect to continue to invest against strong demand signals. However, the growth rate will be lower than fiscal 2025 (which ends in June),” Microsoft CFO Amy Hood said.

Meta also sent a mixed message regarding the performance of its AI tools. Although the social giant reported strong quarter four results, its sales forecast for the current quarter was not as strong. Analysts say that Meta needs to monetize its AI tools quickly to reverse the huge expenses it has been incurring.

“With these huge expenses, they need to turn the spigot on in terms of revenue generated, but I think this week was a wake-up call for the US. For AI right now, there’s too much capital expenditure, not enough consumption,” Futurum Group analyst Daniel Newman said.