Microsoft MSFT announced plans to spend $80 billion in fiscal 2025 on constructing data centers designed for artificial intelligence workloads. Over half of this spending will be focused on the United States, according to a blog post by Brad Smith, Microsoft Vice Chair and President. The fiscal year will conclude in June 2025.
“Today, the United States leads the global AI race thanks to the investment of private capital and innovations by American companies of all sizes, from dynamic start-ups to well-established enterprises,” Smith wrote, as quoted on CNBC. He highlighted Microsoft’s collaborations with OpenAI, emerging companies like Anthropic and xAI, and its integration of AI into software platforms such as Windows and Teams.
AI Competition Fuels Investment Surge
The rapid adoption of AI technologies, sparked by OpenAI’s ChatGPT launch in late 2022, has intensified competition among technology giants. Companies are rushing to secure NVIDIA graphics processing units (GPUs) to train and run AI models. Microsoft, having invested over $13 billion in OpenAI, provides cloud infrastructure for the startup and incorporates its AI models into its products.
Increased Capital Expenditures in Fiscal 2025
In the first quarter of fiscal 2025, Microsoft reported $20 billion in global capital expenditures and finance lease acquisitions, with $14.9 billion allocated to property and equipment. Chief Financial Officer Amy Hood stated that capital expenditures would grow sequentially in the fiscal second quarter.
Analysts surveyed by Visible Alpha projected $63.2 billion in additions to property and equipment for fiscal 2025, representing 42% year-over-year growth. Notably, revenue from Azure and other cloud services increased 33% in the fiscal first quarter, with AI services accounting for 12 percentage points of that growth.
Microsoft-Heavy ETFs in Focus
The news put exchange-traded funds (ETFs) with a double-digit exposure to this software leader. These include T-Rex 2X Long Microsoft Daily Target ETF MSFX, iShares Global Tech ETF IXN, iShares Dow Jones US Technology ETF (IYW), Vanguard Information Technology ETF VGT and MSCI Information Technology Index ETF FTEC.
Bottom Line
Microsoft is one of the biggest beneficiaries of the AI boom. It has been investing billions of dollars in expanding its global network of data centers and other physical infrastructure required to develop AI technology that can compose documents, make images and serve as a lifelike personal assistant at work or home. Though Azure growth may continue to slow, Microsoft expects its AI business to be on track to bring in more than $10 billion in sales over the course of a year by sometime in the next quarter, said the management.
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