AI Achievements of Major US Tech Giants
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On November 3, Apple released its Q3 2023 financial report, concluding the earnings season for major US tech companies. Earlier in Q2, there was widespread curiosity about the outcomes of these companies' substantial AI investments, but at that time, AI was just gaining momentum, and direct data was unavailable. The Q3 reports now offer preliminary evidence of AI's tangible effects on their operations.
According to analysis by Economic Observer based on earnings reports and executive statements from Google, Microsoft, Meta, Amazon, and Apple, Microsoft has reaped the most significant benefits from AI so far, particularly in its cloud services. Microsoft Azure, which had seen seven consecutive quarters of slowing growth, experienced accelerated growth in Q3 2023.
For Microsoft and Meta, AI's impact is most evident in advertising efficiency, driving both companies to record-high ad revenues. Apple, which only began focusing on AI in Q3, has yet to see noticeable effects.
In terms of direct revenue, OpenAI has seen the most dramatic transformation. According to an October report by The Information, OpenAI CEO Sam Altman revealed to employees that the company's annual revenue reached $1.3 billion, a 45-fold increase from $28 million the previous year.
Recently, several Chinese AI companies have announced progress in large language models, though none have disclosed concrete financial returns from AI. It's undeniable that China's AI technology and applications are still catching up, lagging behind the US. The experiences of US tech giants may offer valuable lessons for China's AI industry.
OpenAI's revenue primarily comes from ChatGPT. SimilarWeb data shows that after peaking at 1.9 billion users in May 2023, ChatGPT's user base declined to around 1.5 billion in July and August. Its revenue mainly comes from paid subscriptions, priced at $20 (approximately ¥146) per month.
Beyond its $1.3 billion annual revenue, OpenAI's valuation has skyrocketed. From $27-29 billion in April 2023, its valuation surged to $86 billion by October - nearly tripling in just six months.
Apart from OpenAI, other major U.S. tech companies are currently deriving commercial value from generative AI.
Microsoft Cloud is the most direct beneficiary. In the third quarter, Microsoft Cloud revenue reached $31.8 billion, with Azure cloud services growing by 29%. After seven consecutive quarters of slowing growth, this quarter marked a reacceleration.
Microsoft CFO Amy Hood stated, "Higher-than-expected AI consumption contributed to Azure's revenue growth." She added that the third quarter was just a strong start, expressing confidence in their execution capabilities and their ability to continue expanding market share.
In comparison, Google Cloud experienced a slowdown this quarter, with a 22% year-over-year growth, lower than the 28% growth in the first two quarters of this year. Amazon Web Services saw a 12% year-over-year growth in Q3, consistent with the previous quarter, representing one of its lowest growth rates since 2014.
Microsoft Cloud's advantage lies in its ability to provide access to OpenAI, allowing users to directly build their own AI applications on the platform. Microsoft Chairman and CEO Satya Nadella noted that due to this differentiated advantage, 18,000 enterprises are currently using Microsoft Cloud's OpenAI services.
Microsoft's AI product, Copilot, also revealed some subscription data. During the earnings call, Satya Nadella mentioned that 1 million users are paying for GitHub Copilot, while 37,000 enterprises have subscribed to the enterprise version of Copilot, priced at $30 per month.
Microsoft has integrated AI across its product lineup, leading to improved performance. Office commercial products and cloud services revenue grew by 14%, with Office 365 commercial sales increasing by 17%. Dynamics revenue rose by 21%, and search and news advertising sales (primarily from Microsoft's Bing search engine) grew by 9%.
Chen Zemin, an internet media analyst at Huafu Securities, told Economic Observer that Microsoft is moving the fastest in AI applications compared to other U.S. tech giants. The reason is that Microsoft has very direct monetization scenarios, with productivity tools like Office being the closest to generative AI technology, and Microsoft happens to own this critical productivity tool gateway. Domestic companies like Kingsoft Office and Alibaba Cloud Development could learn from Microsoft's approach.
Google and Meta derive more indirect benefits from AI, primarily in the advertising sector.
Meta CEO Mark Zuckerberg mentioned during the earnings call that their AI tools for advertisers have driven the success of Advantage+ (Meta's automated ad system), generating $10 billion in annualized revenue. Over half of advertisers use Advantage+ creative tools to optimize images, text, and ad creatives. Meanwhile, AI-driven feed recommendations have increased user engagement. This year alone, improvements in recommendation algorithms have led to a 7% increase in time spent on Facebook and a 6% increase on Instagram.
Google CEO Sundar Pichai also noted that AI helps advertisers find the largest ideal audience at the lowest possible cost. Early tests show that AI tools can reduce costs by 42% while increasing audience reach by 54% and boosting YouTube video views by an average of 40%.
Amazon did not mention specific AI impacts in its earnings report or call. When questioned, Amazon did not respond by press time. However, Amazon has high expectations for AI returns. CEO Andy Jassy stated that there are significant generative AI opportunities ahead, which could bring tens of billions in revenue to AWS in the coming years.
Like in Q2, U.S. tech giants spent much of their earnings calls discussing AI, unanimously pledging continued investment in the field.
Zuckerberg explicitly stated that AI will be Meta's biggest investment area in 2024, 'whether in engineering resources or computing power.' Meanwhile, Meta will deprioritize some non-AI projects to shift employee focus to AI.
Google has made its choice with real money. In October, Google announced it would provide $2 billion in funding to AI startup Anthropic, a competitor to OpenAI, with an initial investment of $500 million and plans to increase the investment later.
Third-quarter financial reports show that Google's capital expenditures reached $8.1 billion, driven by investments in AI computing and related technological infrastructure. Google CFO Ruth Porat stated that this reflects a significant increase in the company's investment in AI computing. She also mentioned that investments in the fourth quarter would rise, with total capital expenditures for 2024 expected to exceed those of 2023.
Similarly, Amazon also invested in AI startups during the third quarter, committing $4 billion to Anthropic. Amazon further noted that all its major business units are focused on developing generative AI applications.
Microsoft's R&D spending in the third quarter increased slightly compared to the same period last year, reaching $6.66 billion.
Unlike China's Baidu, which has publicly announced AI investments exceeding 100 billion yuan, foreign tech giants have not disclosed their total AI investment figures. When asked about these figures, Microsoft, Google, and others did not respond by the time of publication.
In addition to Microsoft, Google, Meta, and Amazon, another U.S. tech giant, Apple, joined the AI race in the third quarter. On November 3, Apple CEO Tim Cook told analysts that Apple is heavily investing in generative AI.
According to Bloomberg, Apple plans to invest approximately $1 billion annually to integrate generative AI into its product lineup. The report also mentioned that Apple is deeply concerned about falling behind competitors in generative AI, which is seen as a significant misstep in the company's AI development strategy.
Apple's large language model framework, named Ajax, has been trained with over 200 billion parameters. The company plans to incorporate generative AI features into products like Siri, iOS18, Pages, and Keynote.
Additionally, recent moves by major US tech companies in the AI + hardware sector are noteworthy. In September, OpenAI was reported to be working on an 'AI hardware' project, sparking speculation about a potential smartphone. Sam Altman later responded, questioning what kind of hardware is possible in this new era of AI where computers can think independently.
At the 2023 Connect developer conference in September, Meta introduced its first batch of AI-powered glasses, suggesting that the combination of 'MR + AI + smart glasses' could be a future trend. Mark Zuckerberg stated, 'Providing AI capabilities through smart glasses might ultimately become a killer application.' Intel also recently announced the launch of the industry's first AI PC acceleration program, aiming to bring AI performance to over 100 million PC devices by 2025.
Huajin Securities noted in a research report that integrating AI with smart devices could become a new selling point, driving the expansion of related market spaces.