Meta, Google, and Microsoft Increase Investment in AI Development

Although Microsoft did not provide a detailed projection for its AI capital spending for the upcoming quarter or year, chief financial officer Amy Hood indicated that the company anticipates an “increase sequentially” in total expenditures, with expected growth for fiscal year 2026 surpassing that of fiscal year 2025.

Tech firms are pursuing these ambitious capital spending strategies based on the belief that demand for AI will keep rising. However, some analysts are expressing concerns about the potential for an AI market bubble that could eventually burst.

These concerns are amplified by announcements regarding significantly costly, multi-year data center ventures and staggered investments. Last month, Nvidia announced plans to invest “up to $100 billion” in OpenAI, contingent on the AI developer establishing at least 10 gigawatts of data centers utilizing Nvidia’s chips. OpenAI stated just yesterday that it intends to develop 30 gigawatts of computing capacity valued at $1.4 trillion.

Microsoft has pledged a total of $13 billion to OpenAI and continues to utilize the company’s advanced AI models; however, it reported a $3.1 billion drop in net income this quarter due to losses associated with that investment. Microsoft indicated that the ongoing partnership with OpenAI will lead to increased volatility. Looking ahead, Hood mentioned that the company will omit any repercussions from its OpenAI investment in its financial forecasts.

CEO Satya Nadella informed analysts that there are two “critical” aspects to consider regarding the company’s view on capital expenditures. First, it is exploring methods to make its data center fleet “fungible,” or adaptable, allowing modifications to align with future customer needs. Secondly, the company aims to consistently modernize its infrastructure.

“We don’t just purchase one version of Nvidia and stockpile for all our gigawatts. Every year, we adapt, leveraging Moore’s Law, modernizing and depreciating as we go, and employing software to enhance efficiency,” Nadella stated.

Mark Moerdler, a senior research analyst at Bernstein focusing on global software, highlighted that Microsoft is “building capacity in tranches over time and can shift resources, which provides significant protection.” However, he also posed the question, “Is there an overall AI bubble? [It’s] possible, and they did not respond to that.”