Microsoft will splurge $80 billion on AI data centres in fiscal 2025

Microsoft vice chair and president Brad Smith wrote in a blog post that in fiscal 2025 – which runs to 30 June – his company "is on track to invest approximately $80 billion to build out AI-enabled data centres to train AI models and deploy AI and cloud-based applications around the world. More than half of this total investment will be in the United States, reflecting our commitment to this country and our confidence in the American economy."

$80 billion is significant even by Microsoft standards.

In fiscal 2024, capital expenditure totalled $55.7 billion, which was already a 74.6% increase on 2023's $31.9 billion.

When he shared his outlook for 2025 during Microsoft's end-of-year call last June, CEO Satya Nadella didn't offer any concrete capex projections, simply stating that they were "expected to be higher than FY24" as the company ramped up its AI activities.

This is starting to look like the understatement of the century in light of Smith's revealing blog post, in which he went to some lengths to emphasise the scale of the AI opportunity.

Indeed, the technology hardly needs hyping up, but that didn't stop Smith from giving it a go. He declared that AI is poised to become a world-changing general purpose technology (GPT) – akin to electricity, computer chips and software – and therefore it represents a golden opportunity for US economic growth.

"AI promises to drive innovation and boost productivity in every sector of the economy. The United States is poised to stand at the forefront of this new technology wave, especially if it doubles down on its strengths and effectively partners internationally," he said.

Microsoft is already on its way to realising its dream of playing a starring role in this revolution. In parallel with AI infrastructure investments, its strong partnership with OpenAI has resulted in the integration of the Chat GPT maker's technology into more and more Microsoft products and services.

For Microsoft though, partnerships and infrastructure can only get it so far. It also needs the heft of the incoming Trump administration to give it a hand by adopting light-touch regulation, and by helping it to fend off competition from China.

"China is starting to offer developing countries subsidised access to scarce chips, and it's promising to build local AI data centres. The Chinese wisely recognise that if a country standardises on China's AI platform, it likely will continue to rely on that platform in the future," Smith said.

"The best response for the United States is not to complain about the competition but to ensure we win the race ahead. This will require that we move quickly and effectively to promote American AI as a superior alternative."

Ergo, "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. The United States cannot afford to slow its own private sector with heavy-handed regulations," Smith continued. "The country instead needs a pragmatic export control policy that balances strong security protection for AI components in trusted data centres with an ability for US companies to expand rapidly and provide a reliable source of supply to the many countries that are American allies and friends."

Judging by Smith's missive, the excitement swirling around AI will reach a whole new level in 2025.