Software revenues lag despite tech giants’ $292 billion AI spend

Silicon Valley is betting the farm on AI. Data centers burden the electricity grids. The costs for model training run into the billions. Yet AI revenues in the software industry remain theoretical. From a report: Hyperscalers – combined with Meta and Oracle – plan to spend $292 billion on AI infrastructure by 2025 – an 88% increase since 2023. However, two-thirds of software companies still report slowing growth in 2024.

Semiconductor stocks are up 43% this year on AI expectations, while the software index IGV is up 30%. Microsoft, despite its OpenAI investment, has underperformed IGV by 19% since the release of ChatGPT. Microsoft’s AI revenue is 3% of total revenue, according to estimates from investment bank Jefferies. Snowflake expects an intangible contribution from AI in FY 2025. Salesforce does not consider the material contribution from new AI products in its FY 25 guidance. Adobe’s Firefly AI, launched in March 2023, has not accelerated revenue.