Microsoft is growing spending at a fee not seen since not less than 2016. It nonetheless may not be sufficient.

In its earnings report on Thursday, Microsoft mentioned capital expenditures jumped 79% from a yr earlier to $14 billion. The corporate is spending a lot quicker than it is growing income — gross sales climbed 17% within the interval.

Even with all that funding, Microsoft has a scarcity of information middle infrastructure, particularly for deploying synthetic intelligence fashions.

“We do have demand that exceeds our provide by a bit,” Microsoft CFO Amy Hood instructed analysts on the corporate’s earnings name.

Corporations want an ever-increasing quantity of compute to run hefty workloads, including human-like generative AI options into their merchandise. It is a growth that was kicked off by OpenAI and its ChatGPT chatbot, and Microsoft has adopted swimsuit, including assistants to the Groups communication app, Bing search engine, and different providers. The know-how can summarize assembly transcripts, compose emails and clarify info from the net.

Microsoft is not the one AI {hardware} vendor with a provide problem.

Nvidia, the largest developer of processors for coaching and deploying generative AI fashions, has been provide constrained, with income greater than tripling in consecutive quarters. Now Microsoft, one in every of Nvidia’s main prospects, is feeling the stress.

In the course of the fiscal third quarter, income in Microsoft’s Azure cloud rose 31%, with 7 proportion factors from AI. Hood mentioned that the capability situation may need affected AI outcomes and can have an effect within the fiscal fourth quarter. A provide limitation means Microsoft has much less accessible capability to lease out to shoppers for deploying AI fashions on the inference stage, she mentioned.

Azure is vital to Microsoft’s future, contributing tens of billions of {dollars} in income each quarter and rising quicker than most different components of the corporate. Inside Azure, AI providers stand out as a spotlight, attracting new shoppers as Microsoft goes up in opposition to Amazon Net Companies.

Hood mentioned that capital expenditures will improve “materially” within the present quarter, primarily for cloud infrastructure. And he or she known as for increased capital expenditures within the new fiscal yr, starting July 1.

Microsoft intends “to scale to satisfy the rising demand sign for our cloud and AI merchandise,” she mentioned.

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