Palihapitiya's AI Skepticism Tests Microsoft's Earnings Growth

Billionaire investor Chamath Palihapitiya sparked debate in the tech industry by stating that AI additions contribute 'literally zero' to earnings growth for large corporations. This claim came just six days before NVIDIA, a leading provider of AI capacity, was set to report its fiscal Q3 results.

Palihapitiya's skepticism was directed at Microsoft, which has been touted as an example of the success of enterprise AI adoption. However, Microsoft's latest earnings report reveals that while the company's revenue has increased by 17.75%, its cost side is a major concern. Q4 capex reached $35.8 billion, up 109.63%, and full-year capex hit $115.95 billion, up 79.62%.

NVIDIA will be closely watched as it reports its fiscal Q3 results on August 26. Palihapitiya's claim that AI has no impact on earnings growth will be tested against Microsoft's contracted backlog of $678 billion. If NVIDIA fails to meet expectations, the narrative may shift towards the companies powering and cooling the racks.