Major tech companies are facing increasing pressure on their profit margins due to substantial investments in artificial intelligence (AI). As firms like Microsoft, Alphabet, and Meta ramp up their capital expenditures, projected to reach over $311 billion in the current fiscal year, concerns are rising about the sustainability of these investments. Analysts warn that the high costs associated with AI infrastructure, including depreciation of assets, could lead to a decline in net profits before these companies see a return on their investments.

The shift towards AI is prompting companies to adjust their asset lifespans to mitigate the impact of depreciation on their financials. For instance, Microsoft and Meta have extended the useful life of their servers and networking equipment, which has resulted in improved net income figures. However, the overall sentiment among investors remains cautious, as the anticipated revenue growth from AI has not yet materialized at the expected pace, leading to fears of a repeat of the 2022 market downturn.