DeepSeek, a Chinese AI startup developing open-source large language models, recently launched its R1 model, claiming performance comparable to OpenAI’s and utilizing lower-cost chips and less data. This development sparked concerns about the substantial AI investments made by major US tech companies. This article examines the performance of the “Magnificent Seven” tech giants—Nvidia, Apple, Meta, Microsoft, Alphabet, Amazon, and Tesla—in light of DeepSeek’s emergence and the overall AI landscape.
Table Content:
- Meta’s Q4 Earnings and AI Investment Plans
- Tesla’s Q4 Results and Future Growth
- Microsoft’s Mixed Q2 Performance and AI Opportunity
- Apple’s Q1 Results and AI Ambitions
- Alphabet’s Q4 Performance and Increased AI Spending
- Amazon’s Q4 Earnings and Cloud Computing Concerns
- Nvidia’s Upcoming Results and the DeepSeek Effect
Former US president Donald Trump recently announced a $500 billion initiative to bolster US AI infrastructure through private sector investments from companies like OpenAI, Oracle, and SoftBank. Microsoft and Nvidia were also named as key initial technology partners. This significant investment underscores the importance of AI in the current technological landscape. The emergence of DeepSeek, however, raises questions about the efficiency and competitiveness of these large-scale investments.
This earnings season has presented a mixed bag for the Magnificent Seven, raising the question: Is the promise of AI growth sufficient to maintain investor confidence, or has DeepSeek’s entry impacted the appeal of these tech behemoths? Let’s delve into their recent performance.
Meta’s Q4 Earnings and AI Investment Plans
Meta reported strong fourth-quarter earnings, exceeding expectations with revenue of $48.4 billion and earnings per share of $8.02. The company’s full-year net income soared by 59% to $62.4 billion. However, Meta projected slower revenue growth for the first quarter, between 8% and 15% year-on-year, compared to the fourth quarter’s 21% growth.
Prior to the earnings release, CEO Mark Zuckerberg announced a substantial investment of up to $65 billion in AI infrastructure projects for the current year. This commitment to AI development signals Meta’s ambition to remain competitive in the rapidly evolving AI landscape.
Tesla’s Q4 Results and Future Growth
Tesla’s fourth-quarter results fell short of expectations, with revenue of $25.7 billion and adjusted earnings per share of $0.73, both below analyst forecasts. Full-year revenue grew by a mere 1% compared to 2023. Despite these figures, Tesla’s stock price has surged by 93% over the past year, potentially influenced by CEO Elon Musk’s close advisory role to former President Trump.
Tesla provided a vague outlook, promising a return to growth in 2025 without specific targets. This lack of clarity contrasts with previous years’ more detailed projections, raising concerns among some analysts about the company’s future growth trajectory.
Microsoft’s Mixed Q2 Performance and AI Opportunity
Microsoft delivered mixed second-quarter results, with revenue slightly exceeding estimates at $69.6 billion and earnings per share of $3.23. However, cloud revenue, a key metric, missed expectations at $40.9 billion. Despite this, analysts remain optimistic about Microsoft’s long-term prospects in the AI arena, given its extensive software ecosystem and early adoption of AI technologies.
Experts suggest that DeepSeek’s emergence, by lowering the cost of AI, could actually expand the market and benefit Microsoft by increasing demand for its AI-enabled services.
Apple’s Q1 Results and AI Ambitions
Apple reported mixed first-quarter results, with revenue slightly surpassing expectations at $124.3 billion and earnings per share of $2.40. However, iPhone sales disappointed, while Mac sales exceeded forecasts. Apple’s future growth relies heavily on its new cycle of artificial intelligence and the recent release of Apple Intelligence.
While the market expressed enthusiasm for DeepSeek’s potential impact on edge AI due to cheaper inference, Apple’s response was less enthusiastic, leaving some uncertainty about its long-term strategy in this area.
Alphabet’s Q4 Performance and Increased AI Spending
Alphabet’s fourth-quarter results were mixed, with earnings per share exceeding estimates at $2.15 but revenue falling slightly short at $96.47 billion. The company announced a significant increase in AI spending to $75 billion for the year, exceeding analyst expectations by 29%.
This substantial investment, however, has raised concerns among some investors, particularly in light of DeepSeek’s demonstration of cost-effective AI solutions. Furthermore, an announced anti-trust probe into Google by China added to investor unease.
Amazon’s Q4 Earnings and Cloud Computing Concerns
Amazon’s fourth-quarter results exceeded expectations, with revenue of $187.7 billion and earnings per share of $1.86. However, revenue for its Amazon Web Services cloud business slightly missed forecasts at $28.7 billion.
The company’s first-quarter revenue guidance also disappointed investors. CEO Andy Jassy announced a planned $105 billion in capital expenditures for 2025, primarily focused on AI and data centers, raising concerns about the return on these significant investments.
Nvidia’s Upcoming Results and the DeepSeek Effect
Nvidia, significantly impacted by the DeepSeek-induced tech stock sell-off, is set to report its fourth-quarter results. The company has guided to revenue of $37.5 billion, slightly above Wall Street expectations. Investors will closely scrutinize Nvidia’s outlook, particularly in light of renewed capital expenditure commitments by Meta, Microsoft, and Amazon, which may provide context to the perceived threat posed by DeepSeek.
The DeepSeek episode has undoubtedly shaken the tech landscape, raising questions about the future of AI investment and the competitiveness of established players. The Magnificent Seven’s mixed earnings results further highlight the challenges and uncertainties in this rapidly evolving sector. The coming months will be crucial in determining how these tech giants adapt to the changing dynamics of the AI market and whether their substantial investments will yield the anticipated returns.
