AI: Tech Giants Burn Billions, But Where Are the Profits ?

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OpenAI just hit the jackpot: $6.6 billion raised in one go. An absolute record for a private company. Its valuation ? A dizzying 157 billion dollars. The message is clear : AI is still making investors salivate.

Yet behind these staggering figures lies a less rosy reality. Tech giants and startups in the sector are sinking fortunes into AI, without seeing any profits. A paradox that is raising more and more questions in Silicon Valley and beyond.

AI, a financial abyss with uncertain promises

OpenAI is just the tip of the iceberg. Everywhere in tech, AI is devouring colossal budgets. Microsoft injected $19 billion in just one quarter. Google, Amazon, Meta… they are all following suit. The reason? Training AI models requires phenomenal computing power. It requires gigantic data centers, thousands of cutting-edge GPUs, and considerable energy. Not to mention the stratospheric salaries of AI experts, veritable rock stars of coding courted by all companies.

But these massive investments are not yet translating into equivalent revenues. OpenAI, despite its dazzling success, is expected to lose $5 billion this year. Even established giants are struggling to make their efforts profitable. AI remains for the moment more of a cost center than a profit generator.

The great bluff of “AI” smartphones

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Smartphone manufacturers are racing to integrate AI into their devices. Google, Apple, Samsung… all tout the merits of their new “AI” features. Smart photo editing, contextual suggestions, more powerful voice assistants… The promise is enticing. But the reality is more nuanced.

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Leo Gebbie, an analyst at CCS Insight, points to a major problem: “Consumers are not paying more for access to these AI features. And for now, they don’t seem ready to change their phones just for that.” The result: massive investments in R&D for an uncertain return on investment. Manufacturers hoped that AI would boost sales in a saturated market. For now, that’s not really the case.

AI in business, a disillusionment in sight ?

On the business side, AI arouses both hope and skepticism. Microsoft is betting big on its Copilot assistant to boost its Office suite. Problem: the price doubles, without the added value being obvious.

This case is not isolated. Many companies struggle to see the concrete return on their AI investments. Promises of increased productivity come up against the reality on the ground. Training employees, adapting processes, managing algorithm biases… Integration of AI is a complex challenge that cannot be summed up as simply buying miracle software.

Will the AI ​​bubble burst ?

Faced with this gap between investments and revenues, some are starting to worry. The shares of giants like Alphabet and Microsoft have fallen in recent months. Venture capitalists, after rushing into AI startups, are starting to ask questions.

David Cahn, an investor at Sequoia, did the math: for the AI ​​ecosystem to be profitable, it would need to generate $600 billion in revenue per year. A goal that seems unrealistic in the short term. Some even fear an “AI bubble” similar to the internet bubble of the 2000s.

However, most players in the sector remain convinced that these massive investments will eventually pay off. AI is seen as a transformative technology, capable of revolutionizing many industries. But the path to profitability is likely to be longer and more winding than expected.

• Tech giants and AI startups are sinking billions into AI, but struggling to generate matching revenues
• The integration of AI into smartphones and enterprise tools has yet to translate into significant increases in sales
• Despite growing concerns about profitability, most players remain convinced of AI’s transformative potential in the long term

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