AI Expansion: Tech Giants Fuel Growth with Record Investments

Tech giants like Microsoft, AWS, and Google are ramping up investments in AI, marking a shift from concept to full-scale deployment. Hyperscalers are committing substantial capex to meet strong AI demand, with Google planning a $75 billion investment by 2025 to enhance its AI and cloud infrastructure.

The rapid adoption of artificial intelligence (AI) is reshaping the technology landscape as enterprises transition from proof-of-concept to full-scale deployment, as highlighted in a report by ICICI Securities. This surge in interest is driving leading cloud service providers, known as hyperscalers, to commit to high levels of capital expenditure (capex).

Major tech companies, including Microsoft, AWS, and Google, are heavily investing in expanding their AI and cloud infrastructure. AWS reported a capex of $26.3 billion for the December 2024 quarter, a figure that's expected to remain consistent through 2025. The tech giant envisions AI, particularly inference technology, as an integral aspect of its service offerings alongside traditional computing, storage, and databases.

Similarly, Microsoft's capex for the same period, which includes finance leases, was $22.6 billion. The company plans to sustain this level of expenditure in the next two quarters and foresees continued robust investment in AI beyond 2025, albeit at a slower rate. Meanwhile, Google has announced a massive planned investment of $75 billion in 2025, targeting AI services, data centers, and networking enhancements for its divisions such as Google Cloud and Google DeepMind.

Efforts to reduce AI consumption costs are underway among hyperscalers, achieved through improved software efficiency and scaling AI infrastructure. Microsoft has reported a 2x price-performance improvement with each new hardware generation and significant gains per AI model iteration. Both Microsoft and AWS recognize DeepSeek's significant contributions to AI advancements. According to Microsoft, reduced inference computing costs are expected to boost the use of AI applications, which will benefit cloud and PC providers.

AWS CEO expressed optimism, stating, "I believe the cost of inference will meaningfully come down. I think it will make it much easier for companies to infuse all their applications with inference and generative AI." Concurrently, IT services firms are witnessing a surge in demand for AI-driven solutions, including agentic AI, GenAI, and cloud services. Major IT companies have partnered with hyperscalers to aid customers in integrating AI and cloud solutions effectively.

Leading IT firms such as TCS and Infosys report a marked increase in AI and GenAI deployments, with TCS observing a surge in Q3FY25, and Infosys developing over 100 new GenAI agents for clients. As AI technologies continue to evolve, businesses across sectors are likely to incorporate AI into their operations at an accelerated rate, establishing it as a key growth driver for both cloud and IT service providers.

(With inputs from agencies.)