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Satellite images expose potential trouble behind Microsoft's $5 billion AI spending shortfall
Microsoft spent $5 billion less than expected on AI last quarter, and satellite images may show why.
In Microsoft's quarterly earnings call last month, chief financial officer Amy Hood said delays by third-party cloud providers contributed to lower-than-expected AI infrastructure spending. Microsoft cut its annual capital expenditure forecast by $5 billion.
The news sent neocloud stocks tumbling, highlighting concerns that the young companies can't deliver on their multibillion-dollar promises.
Although Microsoft didn't name names, two data center projects from neoclouds Iren and Nebius could be responsible, according to satellite analysis from research firm Aterio.
In Texas, IREN is building four data centers under a $9.7 billion deal with Microsoft. An October 21 satellite flyover found that one of the buildings, Horizon 4, was still missing backup power generators and cooling equipment — and risked missing its scheduled delivery by the end of the year, Aterio said.
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AI buildout hits snag as Google and Microsoft put off raising capex forecasts
The past few quarters of hyperscaler earnings have been marked by ever-increasing capital expenditure forecasts as tech giants race to build out artificial intelligence infrastructure to meet what they describe as insatiable demand.
At least for the moment, Microsoft and Alphabet are telling a slightly different story.
In their earnings reports Wednesday, both companies shared capex figures that came up shy of analysts' estimates. Microsoft reduced its capex forecast for the year to $170 billion from $175 billion, and Alphabet held its guidance at $195 billion to $205 billion.
The numbers suggest a slowdown is nowhere in sight, but they do represent another potential point of concern for the AI buildout. Shares of neoclouds CoreWeave, Nebius and IREN all dropped after the reports, as did Oracle, which is one of the biggest spenders on AI infrastructure.
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