AI Lesson for Microsoft and Google: Spend Money to Make Money

This illustration picture shows icons of Google's AI (Artificial Intelligence) app BardAI (or ChatBot) (C-L), Open AI's app ChatGPT (C-R) and other AI apps on a smartphone screen in Oslo, on July 12, 2023. (Photo by OLIVIER MORIN / AFP)
This illustration picture shows icons of Google's AI (Artificial Intelligence) app BardAI (or ChatBot) (C-L), Open AI's app ChatGPT (C-R) and other AI apps on a smartphone screen in Oslo, on July 12, 2023. (Photo by OLIVIER MORIN / AFP)
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AI Lesson for Microsoft and Google: Spend Money to Make Money

This illustration picture shows icons of Google's AI (Artificial Intelligence) app BardAI (or ChatBot) (C-L), Open AI's app ChatGPT (C-R) and other AI apps on a smartphone screen in Oslo, on July 12, 2023. (Photo by OLIVIER MORIN / AFP)
This illustration picture shows icons of Google's AI (Artificial Intelligence) app BardAI (or ChatBot) (C-L), Open AI's app ChatGPT (C-R) and other AI apps on a smartphone screen in Oslo, on July 12, 2023. (Photo by OLIVIER MORIN / AFP)

Artificial intelligence is expected to pay off big for tech giants including Microsoft and Alphabet someday. But expect deeper investments before gains trickle to the bottom line, the companies said on Tuesday.
Microsoft said costs rose sharply as it built new data centers to support AI and that capital expenditures will continue to rise as it buys chips from the likes of Nvidia Corp to power those data centers, Reuters said.
The Windows maker's shares were down more than 4% in premarket trading on Wednesday, while Alphabet gained nearly 7%.
Microsoft is bearing AI costs in two ways, analysts said: to power its own products such as its forthcoming $30-a-month Copilot AI assistant, and to serve companies wanting to use its Azure cloud computing services to create AI products.
Microsoft executives said the service will start generating the bulk of its revenue in the second half of its fiscal 2024 ending June 30.
"They're buying a bunch of H100s," said Ben Bajarin, chief executive and principal analyst of Creative Strategies, referring to Nvidia's flagship chips for AI.
"You're probably going to see a similar thing with Amazon , if not this quarter then the next quarter, because both of them are the clouds that the vast majority of the market is using for training (AI systems) right now."
Alphabet, however, kept down costs, though not for long. Chief Financial Officer Ruth Porat, who will become president and chief investment officer, said delays in data center construction are why second-quarter capex was lower than expected.
"As far as AI is concerned, while Google may have spent upwards of $200 billion on AI investments over the past decade, much of that isn't necessarily appreciated by users and investors," said Scott Kessler, global sector lead for technology media and telecommunications at Third Bridge.
One advantage Google has, analysts said, is that it has its own custom chip for handling AI work called the Tensor Processor Unit (TPU), which helps lower costs.
Microsoft may be "aggressively buying Nvidia chips, given Microsoft does not have its own silicon as an alternative," said Atlantic Equities analyst James Cordwell.
But Google conceded that it will buy chips from other companies as well as using its own, and Porat said that spending could put a drag on profit and growth.
"The message on inflection point was the same," from Microsoft and Google, said Gene Munster, managing partner at Deepwater Asset Management, "but the difference was Microsoft investors wanted to see more."



Impostor Uses AI to Impersonate Rubio and Contact Foreign and US Officials

Secretary of State Marco Rubio attends a signing ceremony for a peace agreement between Rwanda and the Democratic Republic of the Congo at the State Department, June 27, 2025, in Washington. (AP Photo/Mark Schiefelbein, File)
Secretary of State Marco Rubio attends a signing ceremony for a peace agreement between Rwanda and the Democratic Republic of the Congo at the State Department, June 27, 2025, in Washington. (AP Photo/Mark Schiefelbein, File)
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Impostor Uses AI to Impersonate Rubio and Contact Foreign and US Officials

Secretary of State Marco Rubio attends a signing ceremony for a peace agreement between Rwanda and the Democratic Republic of the Congo at the State Department, June 27, 2025, in Washington. (AP Photo/Mark Schiefelbein, File)
Secretary of State Marco Rubio attends a signing ceremony for a peace agreement between Rwanda and the Democratic Republic of the Congo at the State Department, June 27, 2025, in Washington. (AP Photo/Mark Schiefelbein, File)

The State Department is warning US diplomats of attempts to impersonate Secretary of State Marco Rubio and possibly other officials using technology driven by artificial intelligence, according to two senior officials and a cable sent last week to all embassies and consulates.

The warning came after the department discovered that an impostor posing as Rubio had attempted to reach out to at least three foreign ministers, a US senator and a governor, according to the July 3 cable, which was first reported by The Washington Post.

The recipients of the scam messages, which were sent by text, Signal and voice mail, were not identified in the cable, a copy of which was shared with The Associated Press.

“The State Department is aware of this incident and is currently investigating the matter,” it said. “The department takes seriously its responsibility to safeguard its information and continuously takes steps to improve the department’s cybersecurity posture to prevent future incidents.”

It declined to comment further due to “security reasons” and the ongoing investigation.

One of the officials said the hoaxes had been unsuccessful and “not very sophisticated.” Nonetheless, the second official said the department deemed it “prudent” to advise all employees and foreign governments, particularly as efforts by foreign actors to compromise information security increase.

The officials were not authorized to discuss the matter publicly and spoke on condition of anonymity.

“There is no direct cyber threat to the department from this campaign, but information shared with a third party could be exposed if targeted individuals are compromised,” the cable said.

The FBI warned in a public service announcement this past spring of a “malicious text and voice messaging campaign” in which unidentified “malicious actors” have been impersonating senior US government officials.

The scheme, according to the FBI, has relied on text messages and AI-generated voice messages that purport to come from a senior US official and that aim to dupe other government officials as well as the victim’s associates and contacts.

It is the second high-level Trump administration official to face such AI-driven impersonation.

The government was investigating after elected officials, business executives and other prominent figures received messages from someone impersonating President Donald Trump’s chief of staff, Susie Wiles. Text messages and phone calls went out from someone who seemed to have gained access to the contacts in Wiles’ personal cellphone, The Wall Street Journal reported in May.

Some of those who received calls heard a voice that sounded like Wiles, which may have been generated by artificial intelligence, according to the newspaper. The messages and calls were not coming from Wiles’ number, the report said.