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- Tech giants spending big on AI will have wasted money if they end up as also-rans, Bill Gross said.The billionaire "Bond King" told BI these companies were at risk of frittering away enormous sums.Microsoft, Amazon, and other tech stocks have surged on AI hopes but could disappoint, he said.
US tech titans are spending huge sums to win the AI race — and the ones that lose could see their stock prices take a hit, "Bond King" Bill Gross has warned.
The billionaire investor gave his thoughts to Business Insider after Oracle's market value surged by as much as 43%, or nearly $300 billion, on Wednesday, thanks to an AI-driven revenue projection.
"My biggest concern is what economists refer to as 'malinvestment,' Gross said in an email.
Gross — who cofounded the fixed-income titan PIMCO and grew its flagship Total Return Fund to $270 billion over nearly three decades — said the tech giants are racing to dominate various AI sectors and "seem willing to risk over-investment in hopes of future monopolies."
"Some will fail and current trends — and stock prices based on them — may experience significantly reduced growth," Gross said.
He singled out AI data centers and the "hundreds of billions" being spent on them by companies like Amazon, Meta, Microsoft, and Oracle. Electricity providers are also "gearing up to supply them," he added.
AI companies are investing vast sums in microchips, servers, and other infrastructure they need to build and train increasingly advanced models and harness AI in other ways.
Amazon, Meta, Microsoft, and Alphabet are poised to invest more than $300 billion into AI this year.
The immense buzz around AI has lit a fire under tech stocks.
Shares of the nine most valuable tech companies — Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, Broadcom, Tesla, and Oracle — have all more than doubled since the start of 2023, with Nvidia surging about 12-fold and Meta leaping around six-fold. The group's combined market value now exceeds $22 trillion.
