Microsoft is ramping up its spending on data centers at an unprecedented pace to meet surging demand for its AI and cloud services, Bloomberg reports.
The company’s $14.9 billion capital expenditure in the last quarter marks a major investment, designed to increase its data center capacity amid unprecedented interest in AI solutions. However, the surge in spending has sparked concerns among some investors, as shares fell on Thursday with concerns that this high expenditure could affect profit margins.
The AI boom has created complex challenges for Microsoft, as generative AI technology demands intense computing resources, making it difficult to meet demand for services offered through its Azure cloud platform. Microsoft’s main AI partner, OpenAI, relies heavily on Microsoft’s data centers to provide the computing power behind its generative AI models, pushing Microsoft to keep expanding.
This increased spending mirrors similar moves from other tech giants, including Amazon and Google, as they race to secure their foothold in AI. Amazon leads the spending race with $22.6 billion in the last quarter, while Google invested $13.1 billion. But the high investment levels have led some analysts to caution that current spending rates may be unsustainable over the long term.
Microsoft’s Chief Financial Officer, Amy Hood, highlighted that only about half of Microsoft’s recent AI-related expenditure is directly tied to immediate customer demand. The remaining funds are allocated to long-term infrastructure—new buildings and energy-efficient designs intended to support AI development for years to come. Hood emphasized Microsoft’s strategy to optimize performance while minimizing environmental impact, which is essential to handle the high-energy demands of AI technologies.
