Microsoft is projected to end the year with capital expenditures of at least $53 billion, according to reports. The tech giant's spending is heavily concentrated on artificial intelligence (AI), which includes investments in NVIDIA chips, data centers, and related infrastructure.

New York

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Microsoft is projected to end the year with capital expenditures of at least $53 billion, according to reports. The tech giant's spending is heavily concentrated on artificial intelligence (AI), which includes investments in NVIDIA chips, data centers, and related infrastructure. Microsoft projects to allocate around $20 billion in capital expenditures each quarter into 2025. Despite this significant outlay, the company has not provided a clear timeline for when investors can expect a return on these investments.

In the past year, Microsoft has announced significant investments in various locations around the globe, including Spain, India, Indonesia, and the United States. These investments encompass more than just data centers, as they also include training programs and initiatives related to AI. Microsoft predicts $10 billion in revenue from AI-related sales this year, with a substantial contribution from its Azure cloud business. However, comprehensive disclosures on the sales performance of AI products like copilot plus PCs and copilot for businesses are not available.

Microsoft acknowledges potential challenges, such as investor patience concerning the returns on its investments and the financial impact of its ventures. The company’s partnership with OpenAI reflects its strategy, but Microsoft anticipates that OpenAI's losses may impact its earnings. Additionally, discussions are underway regarding the usage and value of Microsoft’s AI products, like copilot, particularly its pricing model and performance.



Microsoft to end year with capital expenditures of at least $53B

Big Tech's A.I. spending spree is causing CapEx to balloon into the tens of billions of dollars per quarter. That includes Microsoft one of the biggest spenders. Our own Steve Kovach joins us to break down the impact of all these huge numbers. Steve. Yeah Mike it might even be the biggest spender. Microsoft's ending 2024 spending at least 53 billion dollars in capital expenditures and we don't even have the latest numbers for the current quarter. And yet we'll get that in a few weeks. Nearly all of that is for artificial intelligence. That means NVIDIA chips data centers and other related infrastructure for those data centers. And it's not going to stop anytime soon. Microsoft implied to expect around 20 billion dollars in these capital expenditures each quarter going into 2025. The risk of course investors losing their patience for a return on all that massive spending. And by the way Microsoft doesn't even know when that's going to happen. CEO Satya Nadella and CFO Amy Hood on recent earnings calls have said the A.I. demand is there and Microsoft is going to keep spending in order to meet it. Over the last year Microsoft separately has announced at least 20 investments of a billion dollars or more at various locations around the globe. That includes Spain India Indonesia London here in the United States and many more. Those aren't just data centers. Those are training programs and other things related to artificial intelligence investment. Meantime don't have a clear view yet on how well Microsoft's suite of A.I. products are selling. Microsoft has said it's on track to generate 10 billion dollars worth of A.I. related sales this year. That's after spending about 70 billion probably by the year end. A lot of that is coming from the Azure cloud business but still no concrete disclosures from Microsoft on that or the rest. That includes copilot plus PCs which launched this year but without its marquee A.I. feature that was called recall. Microsoft said in May it expected to sell 50 million copilot pilot plus PCs over the course of a year. But no indication it's on pace to meet that goal. Also no clue how well copilot for businesses is selling after more than a year on the market. I've heard from a few CEOs that 2025 is going to be the year they assess if copilot is worth the enormous cost and either spend more or cut back on it. And then of course there's opening. Its losses are now bleeding over to Microsoft. Its biggest benefactor. Microsoft said it expects opening eyes losses to shave a few cents off its EPS in the December quarter about one and a half billion dollars. And finally there's the consumer outside of the enterprise business. Microsoft hired Mustafa Suleyman to be CEO of A.I. at Microsoft back this spring. But right now he's reliant on opening eye for product development of the latest and greatest A.I. features that eventually make their way into Microsoft products guys. Steve we were talking about copilot in particular earlier on the broadcast in light of of course what has been a lackluster performance for the stock this year at least versus its mega cap brethren. You know what. What are you hearing. I know it's all anecdotal. I hear it. I'm sure you do from the enterprise in terms of the usage of copilot disappointed happy. I'm just curious to get your thoughts. It's all over the map. But basically no one has a very solid answer of whether or not it's worth that. Thirty dollars per user per month. That is a huge premium on top of the normal price. CTOs tend to play pay for their companies for the regular apps the outlook word things that you and I use every day. This is extra and it's really hard to just quantify that. And I've talked to a number of CTOs all this year and a lot of them are saying yes we've seen success. We've done pilot programs with a few hundred people here and there. And then this year going into 2025 that that's when the CFO comes in and says is it really worth this cost. Should we spend more or pull back on spending and kind of end these little pilot programs. We'll be doing. You hear a lot of anecdotes from Microsoft as well to David but nothing concrete as far as how many seats they're selling. Yeah. Well for a company as you just said that's poised to spend 80 billion on CapEx next year on cloud and A.I. at least you would imagine investors are going to be very much focused on that. Thank you.

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Rise of AI