By Asa Fitch

The bar for tech companies to make AI profitable was already high. Then came a surge in memory-chip prices that has sent costs through the roof, adding fresh urgency to questions about who's going to pay for it all and how.

The tech companies that are largely funding the AI boom have been avoiding that riddle. They need to invest in chips and data centers as fast as they can to capitalize on the world-changing potential of AI, they argue. This isn't the time for prudence.

Now, though, the cost of AI isn't growing just because they are adding to data-center footprints. It is rising because the stuff they need to buy to make it all work is a lot more expensive.

Memory has become a big issue of late. The most advanced AI computing setups require more of the most advanced kind of memory chips available. This is called high-bandwidth memory. Tech companies are competing to secure supplies, giving memory manufacturers the upper hand on pricing.

The impact has been dramatic. Microsoft last week said about $25 billion of its annual capital expenditures of around $190 billion were down to "higher component pricing." That's code for more expensive memory. Google parent Alphabet and Meta Platforms also cited higher component costs in raising their capital-spending plans.

The impact of the memory crunch has already been far-reaching in consumer electronics. It is hitting personal computers and smartphones as memory makers divert production to more profitable AI-related products.

But surging prices will have an impact on AI itself, too. Tech companies are already under pressure to show their AI investments are paying off as depreciation accelerates and eats into reported profit.

And returns on AI ultimately must come from people who use it. That may be in the form of subscription fees, time spent watching advertisements, software licenses or some other novel way tech companies devise to get money out of customers' pockets.

Making that financial model work is suddenly a lot harder.

This is an edition of the WSJ AI & Business newsletter, a weekly digest to help you make sense of AI's impact on business with news, insights and data from our global team of technology journalists. If you're not subscribed, sign up here.

Can AI Drug Discovery Hit Its Stride?

Drug discovery has long been one of the most promising applications for AI. But efforts to actually develop and sell drugs with AI's help have largely fallen flat so far. Now, Eli Lilly, Roche and other big drug companies are doubling down, investing billions of dollars in supercomputers tuned to look for new treatments. Recent advances that could open the way to quicker drug development are driving some of those investments -- although it may still be some time before AI-concocted drugs proliferate.

The Number

The capital spending planned this year by Microsoft, Amazon.com, Google parent Alphabet and Meta Platforms as the AI race heats up.

What the Humans Are Saying

AI in Charts

Meta Platforms' debt pile is growing fast as it supercharges investment in AI.

That may not look too concerning -- especially if you believe AI will lead to sustained revenue and profit growth.

For Meta, though, that is far from clear. The company's shares are historically undervalued at around 18 times forward earnings. But its route to a return that matches its debt-fueled investments in AI computing power is nebulous at best.

While Meta's revenue is growing fast now -- it rose 33% in the first quarter -- its user growth has been relatively stagnant. This raises questions about how much it can leverage AI further to boost ad revenue. And ad revenue accounts for almost all of Meta's total sales, leaving it with few other avenues to profit from AI.

AI in the Wild

Anthropic is forming a joint venture with some of Wall Street's largest firms that aims to help businesses incorporate AI into their operations. The venture, which counts Goldman Sachs and Blackstone among its backers, expects to target private-equity-owned businesses that are trying to use AI to run more efficiently.

Other Highlights From the Week in AI

   -- The blockbuster trial pitting Elon Musk against OpenAI entered its second 
      week. Our podcast goes inside the courtroom battle. 
 
   -- AI chip player Cerebras is planning an IPO that could raise as much as 
      $3.5 billion. 
 
   -- Meta acquired a humanoid-robot startup called Assured Robot Intelligence. 
 
   -- Coatue Management is starting a venture buying land for data centers that 
      could involve tens of billions of dollars of investment. 
 
   -- The Pentagon agreed to deals with eight tech companies to use AI in 
      classified work after a monthslong feud with Anthropic over the use of 
      its models in warfare. 

About Us

WSJ AI & Business is a weekly look at AI's transformation of the business world. This newsletter was curated and edited by Dan Gallagher and Asa Fitch. Reach them at dan.gallagher@wsj.com and asa.fitch@wsj.com (if you're reading this in your inbox, you can just hit reply). Got a tip for us? Here's how to submit.

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May 05, 2026 12:00 ET (16:00 GMT)

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