Microsoft has announced plans to invest around $80 billion bolstering its data centre capacity for training AI models and deploying AI and cloud-based applications in fiscal year 2025.
The planned investment was announced in a company blog post made on Friday, where it committed to spend more than half of the $80 billion in the United States.
It’s worth noting that while 2025 has just begun for many, Microsoft is already well into its 2025 fiscal year, with it having reported its Q1 2025 earnings back in October. During that period, the company spent $20 billion on capital expenditure, with Microsoft signalling at the time that its capex was only set to grow on a “sequential basis given our cloud and AI demand signals.”
Increased AI competition
The planned investment by Microsoft is unsurprising as it fights to lead the AI revolution, especially with increasing competition from the likes of Google and Meta. Microsoft has already had a significant head start on some of its competitors thanks to its investment in OpenAI, whose ChatGPT product kickstarted the new craze surrounding AI.
It risks losing that dominant position in the market, however, with Google reportedly eager to leverage some of the recent improvements it has made to its Gemini AI model. That includes in the world of AI-generated video, with Gemini’s new Veo 2 model being widely praised compared to the often-janky results delivered by OpenAI’s Sora.
Microsoft could also lose out to OpenAI, which is shifting to a for-profit corporate structure and could steal customers away from Microsoft’s own Copilot AI product. However, Microsoft also stands to benefit from the growth of OpenAI thanks to an exclusive cloud arrangement between the two companies.
Don’t take the increased competition as Microsoft struggling to gain relevance, however. Quite the opposite. With CES set to begin in Las Vegas this week, it’s likely that we’ll see a whole host of consumer tech products leverage Microsoft’s Copilot AI, including Windows PCs and even TVs from LG. In fact, Microsoft is so confident of its success in the AI space, it has reportedly acquired twice as many Nvidia AI chips as its rivals.
Where Microsoft plans to spend its $80 billion
Many of those Nvidia AI chips are set to find themselves installed in many of the new data centres Microsoft is planning to construct as part of its $80 billion investment in fiscal year 2025, although where exactly those will be located remains a subject of debate.
It’s likely that the investment will be concentrated in the regions seeing the most demand for AI, which includes the United States, China, United Kingdom, India and Germany. In fact, we already know that the US is set to get the lion’s share of the funding, with Microsoft committing more than half of its investment to the region.
In the blog post announcing the investment, Brad Smith, Vice Chair and President of Microsoft, noted that the company was “investing heavily to spread American AI platforms around the world” and “advancing international adoption of American AI”. In the same blog he argues the most important US public policy priority should be to ensure that the US private sector can continue to advance “with the wind at its back”.
It would also not be surprising to see some investment come to the UK and the rest of Europe. After all, Microsoft acquired a site in Leeds last year for the development of a new hyperscale data centre. Of course, with UK planning laws being what they are, there’s no guarantee that some of Microsoft’s fiscal year 2025 cash will be spent on that project.
What is certain, however, is that while some will contend that AI is losing its ‘hype’, tech giants such as Microsoft certainly don’t agree, or at least believe that while the hype might be dying down – the need for AI is as present as ever, and they’re willing to spend big to stay on top.
