Microsoft faces capacity shortage for cloud AI despite increased investment

Microsoft is running out of data centre infrastructure to deploy artificial intelligence models in the cloud, despite a 79% year-on-year surge in capital expenditure to $14bn.

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As CFO Amy Hood pointed out, demand for cloud-based AI services is still outpacing supply, although the company is ramping up capacity.

Growing interest in human-like generative artificial intelligence features is forcing companies to incorporate smart assistants into their products. Microsoft has added such features to Teams, Bing and other services following the success of OpenAI's ChatGPT.

The corporation's revenue from its Azure cloud division grew by 31 per cent, with artificial intelligence accounting for 7 percentage points. However, capacity constraints are holding back the AI division.

Hood said supply constraints are reducing the amount of spare capacity Microsoft can lease to run models by customers.

Microsoft's capex will increase "significantly" in the current quarter primarily on cloud infrastructure. The company intends to ramp up investment in the new fiscal year to meet growing demand for cloud services and AI products.

Source: Microsoft