Microsoft lifts 2026 AI spend by $25B to cover component price rises (www.theregister.com)

Microsoft announced a significant increase in its 2026 AI spending, raising its capital expenditure by $25 billion to a total of $190 billion. This surge is primarily attributed to skyrocketing hardware component costs, particularly in memory and storage, driven by the escalating demand for AI infrastructure. Despite these higher expenses, Microsoft remains committed to expanding its resources, planning to invest around $40 billion in hardware and datacenters in the next quarter alone. The company has already spent approximately $97 billion on infrastructure over the past year, resulting in annual recurring revenue of $37 billion from its AI services, illustrating a substantial but incomplete return on investment. This bold financial commitment underscores Microsoft's strategic positioning in the competitive AI landscape, especially as the tech giant adapts its GitHub Copilot billing to a pay-per-token model, partially in response to rising costs. While there are concerns from investors about the current unprofitability of its AI endeavors, Microsoft’s cloud business continues to thrive, contributing significantly to overall revenue growth. With cloud services accounting for over half of their $82.9 billion revenue in Q3, and a robust 29 percent year-over-year increase, Microsoft aims to leverage its infrastructure investments to drive higher demand and long-term profitability within the AI/ML sector.