Skepticism About the Long-Term Profitability of AI Investments in Big Tech
Despite the ongoing AI hype, Peter Berezin, chief global strategist at BCA Research, is skeptical about the long-term profitability of AI investments, particularly for Big Tech companies. While AI technology has great potential to enhance productivity, Berezin argues that the substantial costs associated with AI development may not translate into high returns. The competition in the AI sector, coupled with the expensive nature of the technology, raises concerns about monetization, with Berezin suggesting that these companies may end up losing money rather than reaping significant financial rewards.
The Problem of Competition in AI
Berezin emphasizes the high level of competition in the AI industry, which he believes is a key obstacle for investors hoping to profit from the technology. Referring to venture capitalist Peter Thiel's famous quote, "competition is for losers," Berezin argues that AI, being highly competitive with many players entering the field, does not provide the monopolistic environment necessary for sustained profit generation. If multiple companies, such as OpenAI, Anthropic, and DeepSeek, are offering similar AI products, it becomes difficult for any one of them to charge significant fees or generate profitable returns.
Also Read: Microsoft Announces New Round of Layoffs Amid AI Investment Focus
High Capital Expenditure, Low Returns
Berezin points to the massive capital expenditure (capex) being directed towards AI as a defensive move rather than an offensive strategy. Big Tech companies are pouring billions into AI infrastructure to maintain their competitive edge and market share. However, Berezin suggests that, at best, these investments will merely help these companies keep up with the competition. The aggressive spending on AI, he believes, is unlikely to lead to increased market dominance or profitability in the long term, with some companies potentially losing their competitive advantage despite the heavy investments.
