Meta, Google, and Microsoft Triple Down on AI Spending
Although Microsoft did not offer specific guidance for its AI capital spending for the next quarter or year, the company’s chief financial officer, Amy Hood, said the company’s total spending “will increase sequentially, and we now expect the growth rate in fiscal 2026 to be higher than that of fiscal 2025.”
Tech companies are making these ambitious plans to increase capital spending on the assumption that demand for AI will only grow. But some analysts worry that the AI market is a bubble that will eventually burst.
These concerns are fueled by announcements of extremely expensive, multi-year data center projects and phased investments. Last month, Nvidia announced it would invest “up to $100 billion” in OpenAI, provided the ChatGPT maker builds and deploys at least 10 gigawatts of AI data centers using Nvidia’s chips. OpenAI, meanwhile, announced yesterday that it plans to develop 30 gigawatts of computing resources worth $1.4 trillion.
Microsoft committed to investing a total of $13 billion in OpenAI and continues to use the company’s cutting-edge AI models, but suffered a net profit of $3.1 billion this quarter due to losses from that investment. Microsoft said the ongoing nature of its partnership with OpenAI would lead to increased volatility. Going forward, Hood said, the company will exclude any impact from its investment in OpenAI in its financial outlook.
Microsoft CEO Satya Nadella told analysts there are two “critical” things to consider about how the company approaches its capital spending. The first is that it is finding ways to make its fleet of data centers “fungible” or interchangeable, meaning they can be easily modified to meet changing customer demands in the future. The second is that the company expects to continually upgrade its infrastructure.
“It’s not like we buy a version of Nvidia and charge it for all the gigawatts we have. Every year you buy, you apply Moore’s Law, you continually upgrade and depreciate it, and you use software to increase efficiency,” Nadella said.
Mark Moerdler, senior research analyst specializing in global software at Bernstein, says Microsoft “builds capacity in increments over time and can move resources around, which gives them a lot of protection.” But, he added: “Is there a global AI bubble? [It’s] possible, and they did not respond.
