While AI spending is top of mind, online ads are driving a lot of Big Tech's growth

Core Insights - Tech giants are significantly increasing their spending on artificial intelligence while also experiencing growth in their digital advertising businesses [1][8] - Quarterly earnings from Meta, Amazon, Alphabet, and Microsoft indicate strong revenue growth in advertising despite earlier economic concerns [2][3] Digital Advertising Growth - Meta reported a 26% year-over-year increase in total third-quarter revenue to $51.24 billion, with 98% derived from online ads [3] - Amazon's online ad revenue grew 24% year-over-year to $17.7 billion, outpacing its AWS cloud computing unit's 20% growth [3] - Alphabet's advertising sales rose 13% to $74.18 billion, with YouTube ad sales increasing 15% to $10.26 billion [5] - Microsoft's search and news advertising unit generated $3.7 billion, a 14% increase from the previous year [5] Economic Context - Concerns about economic turbulence affecting ad budgets have eased, with a shift from traditional advertising to digital platforms being observed [2][6] - Analysts suggest that the digital ad market remains strong despite economic instability, which seems to be priced in by many [2] AI Investments - Tech companies are not reducing AI spending despite economic concerns, with collective capital expenditures expected to exceed $380 billion this year [9] - Meta's focus on AI investments is seen as crucial for maintaining competitiveness, although the financial benefits of these investments remain uncertain [14][16] Company-Specific Developments - Meta's stock fell 11% after raising its capex guidance, leading to a downgrade by analysts who question the company's AI investment strategy compared to rivals [10][11] - Amazon is expanding its ad-specific demand-side platform, enhancing partnerships with platforms like Roku, Netflix, and Spotify [4] - Reddit reported a 68% increase in third-quarter sales, indicating robust growth in the online advertising space beyond the major tech companies [7] Future Outlook - The upcoming holiday season will be critical in assessing consumer spending and its impact on corporate marketing budgets [17] - Analysts are particularly focused on Black Friday sales as an indicator of future advertising revenue trends [17]