r/investing
I didn’t realize Microsoft was spending this much on infrastructure
Author is surprised by MSFT's massive $30.9B quarterly AI capex, shifting its perception to a capital-intensive business.
- Revenue, operating income, and Azure growth remain strong.
- Solid top-line and operational growth despite heavy investments.
- Massive $30.9B quarterly capex significantly increases capital intensity.
- Heavy AI infrastructure spend alters the traditional high-margin, asset-light business model perception.
I opened Microsoft’s latest quarter expecting to find some obvious reason people have turned so negative on the stock. The growth numbers didn’t really surprise me that much. Revenue was still up, operating income was still up, Azure was still growing fast. The number I kept staring at was cash paid for PP&E: $30.9B in one quarter. I still think of Microsoft as Office, Azure, enterprise software, high margins, all that. But that capex number is way heavier than the version of Microsoft I had in my head. Maybe everyone else already adjusted to this, but I’m only now realizing how different the AI buildout makes the business feel.
I have more of an issue (as an investor) on how much effort they put in these new things but havent managed to pivot.
Personal opinion - if they started a whole separate company that no one associated with the social media wing, it might have more sticking power.
Aren’t all the tech companies chasing AI spending similarly?
Yeah, this "the profits are unclear" mantra isn't shifting as fast as reality. The margins we got in earnings in Q2 were absurd. Analysts repriced over +10% in earnings upgrades.
Nah, that's just coincidence! Clearly, AI is a money sink.
yes true, i was thinking more about the consumer side than the training side
They do last more than three years, is my point. That three year number predates anyone having experience longer than that in the space. ChatGPT is only 3.5 years old!
"Lost the race" is a stupid claim, the race has barely started. Don't listen to that guy
Everyone is spending on AI. AMZN is spending even more I think. The real example is metaverse. I think he spent almost 100bil on it...did the stock even shrug?
Nope.
The stock has been down for about a year but that’s in spite of massive revenue and earnings jumps
If the stock didn’t move, their bank accounts certainly did
The only one keeping CAPEX reasonable is Apple
Siri: " The tin man would not benefit from brain surgery, because he doesn't have a... oh, you mean me, don't you.."
Not true
Splitting AI into two components, the hardware that trains vs the hardware that runs, would be a huge boon
Running the AI could be done on hardware generations old. No one is going to notice or care if their answers come in 10 seconds vs 5 and non-LLM AIs are fast enough to inject frames into games.
Even training doesn’t HAVE to scale upward forever. There are limits to how large these models can get and diminishing returns to the benefits each iteration provides over the last
Speed isn't even the main concern after 3-7 years. The hardware will generally be unsupported with no further cyber security updates or integration with the newer tools being used on the hardware everywhere else in the fleet.
I don't think that you even understand the hardware problem that you are calling solvable.
I don’t need to understand the hardware problem
I understand engineering.
Understanding the problem is usually the first this step towards engineering a solution. I wish you the best of luck with your Bachelor's in Engineering from Ignorance State University.
I work at a fortune 100 company and they just rolled out ChatGPT enterprise a couple of months ago. I wouldn’t say they are losing the enterprise battle.