Investors faced three unresolved questions about artificial intelligence spending and its returns, Bloomberg Television market commentators said in a Market Snapshot programme published Oct. 16.
The questions concerned the market’s eventual size, its economics and where companies could build durable competitive advantages. Participants said convincing answers could remain unavailable for some time.
One commentator cited remarks earlier in the week by Broadcom’s chief executive, who said companies were gambling because nobody had visibility into how much spending was speculative. The executive’s name was not shown in the supplied transcript.
The uncertainty had contributed to concerns about companies including Nvidia and Broadcom as spending reached increasingly large amounts, the commentator said. Companies were paying for computing tokens without knowing whether the expenditure would produce an adequate return on investment.
Another participant said companies were already using returns to guide adoption and would not maintain current spending without seeing benefits. The remarks did not specify those returns or identify which companies had achieved them.
The discussion also focused on whether enterprise spending was increasing fast enough to justify investment within the time frames used to value artificial intelligence stocks. One commentator said the pace of acceleration was slowing and raising concerns, though no growth figures or comparison periods were provided.
Free cash flow would receive close attention during the earnings season as investors assessed how companies financed large capital expenditures, another market commentator said. The participant said Alphabet’s free cash flow had turned negative, joining Amazon and Oracle, but gave no figures or reporting periods.
Higher yields could intensify scrutiny of financing for those expenditures, the commentator said. The discussion gave no yield level and made no commitment about when spending might slow or when returns could become clearer.
A participant representing a large lender said artificial intelligence could make parts of its operations, including know-your-customer checks, more efficient. The institution and speaker were not identified in the supplied automatic transcript.
The lender was also seeing higher cybersecurity costs stemming from artificial intelligence, the participant said. It was continually reviewing its loan portfolio to understand how the technology affected corporate clients.
The remarks left open the eventual scale and profitability of the artificial intelligence market, the sources of lasting competitive advantage and the timing of measurable returns. They also provided no spending totals, financing commitments or timetable for resolving those questions.
