Meta, Google, and Microsoft Triple Down on AI Spending

Although Microsoft did not provide a specific forecast for its AI capital spending for the next quarter or the coming year, the company’s chief financial officer, Amy Hood, said that the company’s total spending “will increase sequentially, and we now expect the growth rate in fiscal 2026 to be higher than in fiscal 2025.”

Tech companies are making these ambitious plans for more capital spending under the assumption that demand for AI will only continue to grow. However, some analysts are concerned The AI ​​market is a bubble and will eventually burst.

These concerns are being fueled by announcements of hugely expensive, multi-year data center projects and staggered investments. Last month, Nvidia said 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 just yesterday That it plans to develop 30 gigawatts of computing resources worth $1.4 trillion.

Microsoft has committed a total of $13 billion to OpenAI, and it continues to use the company’s Frontier AI models, but $3.1 billion Losses from investments hit net income this quarter. Microsoft says the ongoing nature of the partnership with OpenAI will increase volatility. Going forward, Hood said, the company will exclude any impact from its OpenAI investment in its financial outlook.

Microsoft CEO Satya Nadella told analysts that there are two “important” factors to consider in how the company views 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 changed to meet changing customer needs in the future. The second is that the company expects to continuously modernize its infrastructure.

“It’s not like we buy a version of Nvidia and load up for all the gigawatts we have. Every year, you buy, you ride Moore’s Law, you constantly modernize and depreciate it, and you use software to increase efficiency,” Nadella said.

Mark Moerdler, a senior research analyst covering global software at Bernstein, said Microsoft is “building capabilities in layers over time and can shift resources, which gives them a lot of protection.” But, he added, “Is there an overall AI bubble? It’s possible, and they haven’t answered.”