Zhixun Finance APP noted that large technology companies including Microsoft (MSFT.US), Meta (META.US), and Amazon (AMZN.US) are ramping up spending to construct artificial intelligence datacenters to meet the huge demand, but Wall Street is eager to see faster returns from the multi-billion-dollar investments.

Both Microsoft and Meta stated on Wednesday that their capital expenditures are growing due to investments in artificial intelligence. Alphabet (GOOGL.US) also reported on Tuesday that these expenditures will remain elevated, while Amazon indicated that spending for the rest of this year and 2025 will continue to increase.

Large-scale capital expenditures may threaten the hefty profit margins of these companies, and the pressure on profitability could unsettle investors.

Major tech stocks fell on Thursday, highlighting the challenges these companies face in balancing ambitious artificial intelligence pursuits with the need to assure investors of their focus on short-term performance.

Meta's stock price dropped by 4%, Microsoft's by 6%, even though both companies exceeded expectations in profits and revenues from July to September. Amazon's stock fell by 3.4%, but investors boosted the company's stock in after-hours trading due to better-than-expected third-quarter performance.

"The cost of running artificial intelligence technology is high. Acquiring capacity is expensive," said GlobalData analyst Beatriz Valle.

The competition to establish production capacity among large technology companies has become intense. It takes time to see returns and widespread adoption of this technology.

Amazon said on Thursday that it expects to increase capital expenditure in the foreseeable future to assist in the development of ai software. CEO Andy Jassy referred to artificial intelligence as a 'once-in-a-lifetime opportunity' in a conference call with analysts.

The company's capital expenditure for this year is expected to reach around $75 billion, compared to $48.4 billion last year, and this number is set to increase by 2025.

According to data from Visible Alpha, Microsoft's capital expenditure for a quarter currently exceeds its annual expenditure before the 2020 fiscal year. For Meta, a quarter's spending equals what it spent in a year before 2017.

Microsoft announced a 5.3% increase in capital expenditure in the first quarter, reaching $20 billion, and expects increased expenditure in the second quarter in the ai sector.

However, the company warned that the growth of its key cloud business, Azure, may slow down due to capacity constraints in its datacenters.

"What investors may not realize is that Microsoft tends to overinvest every year – just like this year – causing one full percentage point drag on profit margins over the next six years," said Gill Luria, technical research director at D.A. Davidson & Co.

Meanwhile, Meta warned that infrastructure spending related to ai will 'significantly accelerate' next year.

Capacity constraints hinder industry growth.

Capacity limitations are impacting the entire technology industry.

Chip manufacturers including ai giant nvidia (NVDA.US) are struggling to keep up, which in turn increases the difficulty for cloud computing companies to expand capacity.

Earlier this week, AMD (AMD.US) announced its performance results, stating that the demand for ai chips is growing much faster than supply, limiting its ability to leverage the surge in orders. The company warned that by next year, there will be tight supply of ai chips.

Despite these concerns, Meta and Microsoft stated that they are still in the early stages of the ai cycle and emphasized the technology's long-term potential.

These investments are reminiscent of the era when tech giants developed cloud services and waited for customers to adopt this technology.

Meta CEO Zuckerberg stated on Wednesday's earnings call: "In the short term, investors may not want to hear about infrastructure development, but I believe there is indeed a great opportunity here. We will continue to make significant investments in this area."