Microsoft (MSFT +1.08%) has quickly emerged as a leading player in the generative AI race through internal investments in its products and services and billions of dollars in investments in ChatGPT creator OpenAI.
Some recent research from The Motley Fool analyzed Microsoft's earnings call to find some of the ways the company mentions how it will benefit from generative AI and what steps it's taking now to expand its artificial intelligence footprint. Here's how AI factors into the company's long-term growth plans.
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Data center infrastructure spending
One important area that's at the top of nearly every major tech company's AI strategy is data center infrastructure spending.
Microsoft's management has mentioned infrastructure spending frequently. On the recent second-quarter earnings call, Microsoft CEO Satya Nadella said, "We have more than doubled our overall data center capacity in the last three years, and we have added more capacity last year than any other year in our history."
And Microsoft isn't even close to finishing up its data center infrastructure spending. The company recently said it's on track to spend $80 billion this year alone to build AI data centers and train AI models for its Azure cloud platform.
Recent AI developments by Chinese start-up DeepSeek have raised the question of how much spending is necessary to build advanced AI, but so far, Microsoft and others are staying the course.
By building some of the most advanced data centers, Microsoft hopes to stay ahead of cloud infrastructure companies and offer its Azure cloud computing customers the most robust AI services and tools.
Partnering with AI leaders
Another way Microsoft has talked about its generative AI opportunities is through its relationship and investment with OpenAI. Microsoft was an early investor in the ChatGPT creator and has already invested an estimated $13 billion into the company. One analyst even said it might be "some of the best money ever spent."
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Key Data Points
The investment has given Microsoft access to some of the most advanced large language models (LLMs) through ChatGPT, which it's integrated into many of its services, including Bing, Microsoft 365, and Azure. The foundation of the company's AI Copilot comes from ChatGPT's technology, and it's likely to continue.
Nadella said recently that OpenAI had made a new large Azure commitment, adding: "Through our strategic partnership, we continue to benefit mutually from each other's growth. And with OpenAI's APIs exclusively running on Azure, customers can count on us to get access to the world's leading models."
The company's partnership that extends through 2030 states that OpenAI's API is exclusive to Azure, Microsoft has rights to OpenAI IP (for use in its Copilot service), and the two companies have revenue sharing agreements "that flow both ways." One thing to note is that OpenAI can use other cloud providers for future AI training, but Microsoft has the right of first refusal.
The point here is that Microsoft and OpenAI are still very closely linked, and the two companies benefit from each other's success. Of course, that relationship could change down the line, but for now, it seems the two are still significantly intertwined.
Why this all matters
Microsoft is a key player in cloud computing, with the company taking 20% of the cloud market, behind Amazon's 31%. The good news for the company and shareholders is that artificial intelligence will likely supercharge cloud revenue, with Goldman Sachs estimating global cloud sales could reach $2 trillion by 2030 because of AI.
Microsoft is building its future around this, and so far it's been successful. The company's AI business now has $13 billion in annualized revenue -- a 175% increase year over year.
The AI wars are underway, and Microsoft made a strategic and seemingly prescient decision to tie itself to OpenAI early on. That's already helped the company boost its Azure sales and ensure its products have the latest AI models. That's not a guarantee of future success, of course, but it's certainly a great initial move as it plans for future artificial intelligence growth.
