AI spending spree continues as Microsoft commits $80B for 2025
- Reference: 1736171209
- News link: https://www.theregister.co.uk/2025/01/06/ai_spending_spree_continues_as/
- Source link:
In a [1]blog post that reads almost like a call to arms, Microsoft president and vice chair Brad Smith described AI as a "golden opportunity" for American economic competitiveness, claiming this is set to become a world-changing general-purpose technology.
"AI offers not only new tools for people's work but also new ways to help people learn almost anything. We have the opportunity as a country to equip all Americans with the skills needed to use AI to pursue higher-paying jobs and more successful careers. This should be our national north star," he states in the post.
Microsoft accused of 'greenwashing' as AI used in fossil fuel exploration [2]READ MORE
Yet progress requires new alliances and large-scale infrastructure investments, Smith said, confirming Microsoft is intending to invest approximately $80 billion in AI-enabled datacenters around the world. More than half of this will be invested in the US, naturally.
And Microsoft is not alone in this respect. Last year, Amazon reported that it [3]was on track to spend $75 billion in capital expenditure during 2024, and even more in 2025. "The majority of it is for AWS and, specifically, the increased bumps here are really driven by generative AI," CEO Andy Jassy said in November.
[4]
According to figures from Taiwan-based market watcher TrendForce, AI servers are projected to make up more than 70 percent of the total value of the server industry in 2025, adding up to about $298 billion.
[5]
[6]
Shipments of servers targeting AI increased 46 percent during 2024, it claims, while for 2025 TrendForce forecasts that such hardware will see year-on-year growth of nearly 28 percent, while the proportion of these actual server shipments will increase to more than 15 percent of the total server market.
This trend has also been followed for some time by analysts at Omdia, which in its most recent report late last year estimated that datacenter capex was on track for upwards of 40 percent growth for the whole of 2024, with servers representing nearly half of that, and expected to hit $225-230 billion in value.
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Looking ahead to this year, Omdia forecasts that AI systems will make up 20 percent of overall server shipments, but they will account for 73 percent of server capex spending, roughly aligning with TrendForce estimates. This is because servers procured for AI tend to be highly configured and therefore much more costly than those intended for other workloads, especially as Nvidia GPU accelerators can cost tens of thousands of dollars apiece.
Omdia put a figure on this as well; it estimates that Nvidia's kit represented a whopping 43 percent of server capex during 2024, although it says the GPU giant will struggle to grow this share much further in 2025.
Among other predictions, the analyst biz says that specialized AI cloud businesses will continue to spend in order to grow their share of the market, picking out CoreWeave in particular, which it reckons could outspend Oracle this year.
Growth can't last forever
How long this continues will depend on whether AI turns out to be yet another industry bubble waiting to burst. Qualms have already been raised about the sheer volume of investment dollars being swallowed by AI, with [8]little to show for it so far.
[9]Sorry, but the ROI on enterprise AI is abysmal
[10]Microsoft accused of 'greenwashing' as AI used in fossil fuel exploration
[11]Microsoft accuses Google of creating a lobbying front called 'Open Cloud Coalition'
[12]Amazon stretches working life of its servers an extra year, for AWS and its own ops
Omdia says that clients in highly regulated industries had told it that 2024 would not be the year when they had the necessary regulatory frameworks in place to go big on AI in production. Many were stuck running AI pilots last year, but are scheduled to begin deployment of industry-specific AI models this year, it claims.
Some enterprise investment in 2024 was also limited by GPU availability, which will be significantly better in 2025.
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So the AI datacenter frenzy appears likely to continue for the near future, despite the warnings about the [14]ballooning energy requirements this is driving, and the knock-on effect on the environment. Financial services biz [15]Morgan Stanley issued a report last year estimating that the industry is likely to emit three times more greenhouse gases between now and the end of the decade than if generative AI tech had not been developed.
Still, it is a golden opportunity, right? ®
Get our [16]Tech Resources
[1] https://blogs.microsoft.com/on-the-issues/2025/01/03/the-golden-opportunity-for-american-ai/
[2] https://www.theregister.com/2024/10/31/microsoft_greenwashing_ai/
[3] https://www.theregister.com/2024/11/01/amazon_75b_capex/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Z3wMNIV9VxBt4bCF0Goy5QAAAIM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z3wMNIV9VxBt4bCF0Goy5QAAAIM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z3wMNIV9VxBt4bCF0Goy5QAAAIM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z3wMNIV9VxBt4bCF0Goy5QAAAIM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2024/10/22/genai_roi_appen/
[9] https://www.theregister.com/2024/10/22/genai_roi_appen/
[10] https://www.theregister.com/2024/10/31/microsoft_greenwashing_ai/
[11] https://www.theregister.com/2024/10/29/open_cloud_coalition_microsoft_google/
[12] https://www.theregister.com/2022/02/04/amazon_q4_2021/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z3wMNIV9VxBt4bCF0Goy5QAAAIM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.theregister.com/2024/11/13/datacenter_energy_consumption/
[15] https://www.theregister.com/2024/09/06/datacenters_set_to_emit_3x/
[16] https://whitepapers.theregister.com/
Re: AI and Bitcoin
And if you ignore AI now or keep pointing out how shit/danagerous it actually is, you get ignored at work because they like pissing money on it and riding the hype train but fuck whits in charge with no IT knowledge. Mainly because one director (who shouldn't be in that role) is using CoPilot to write all his reports for him.
I love the coprorate (sic) fine print
"We have the opportunity as a country to equip all Americans* with the skills needed to use AI to pursue higher-paying jobs and more successful careers" = please daddy gubbmint give me tax dollars.
*subject to terms and conditions - exceptions include anyone with a net worth less than $25 million USD, uses non-conforming pronouns, is disabled, etc.
Re: a net worth less than $25 million USD
Ah.... you mean those who are in Trump 2.0's cabinet are the only ones to qualify. Everyone else does not count.
Please... keep blowing up that balloon....
Can't wait until it pops...
So is it a tax writeoff?
Or is it an attempt to get competitors to overcommit and go bust because Microsoft and Amazon can afford to burn the money?
Even if there really is a market for this kind of 'AI', it's nowhere near large enough to ever pay back this kind of money.
Re: So is it a tax writeoff?
"Even if there really is a market for this kind of 'AI', it's nowhere near large enough to ever pay back this kind of money."
You might think so, but I'm not so sure based on some rough numbers:
a) MS revenues for 2024 near enough $250bn.
b) $80bn investment needs say a return of 12%...
c) requires an extra $10bn a year of sales (assuming next to nil operating cost),
d) To wash its face and make a profit, MS have to persuade their customers to pay them 4% more.
Last year MS revenues were up by just shy of 16%, year before 8%, year before 18%, so I'm seeing 4% for the dubious benefits of AI as being easily realised.
I think your error is in assuming that there's any link between the spurious benefits AI might bring, and the amount credulous corporate fools can be persuaded to pay.
Re: So is it a tax writeoff?
Even if there really is a market for this kind of 'AI', it's nowhere near large enough to ever pay back this kind of money.
Of course there is. If we assume AI only replaces call center jobs, and it clearly can start to do that now, then the spend discussed in this article gives roughly a 31k break even cost cut per former employee. If we deprecate that over a 5 year shelf life, then anything over about 6k per year in wage costs is all cheddar. Just from call centers.
I'm not a fan of AI, I think we're going to prematurely push a lot of people out of work with it, which will predominantly affect Gen Z (just finished racking up uni debt for questionable degrees to do jobs that won't exist for long), though clearly not all of Gen Z. In the future it'll just be a productivity tool, but between now and then, lots of jobs are going to vanish in lots of fields.
Can I just confirm?
Is this AI as in LLM and chatbots, or is it the more useful pattern matching AI used in hospitals etc to detect things like cancerous cells?
All the more power to...
FecalBarf, Xshitter and TroothFarcical.
Their bots will post memes of themselves, chat with other bots and the whole internet will collapse in a heap as they alternative switch between praise and slagging each other bot off.
It will eat itself (hopefully) and the rest of social media.
the skills needed to use AI to pursue higher-paying jobs and more successful careers.
But at the same time aren't they saying to the bosses that AI will allow them to do away with their workers?
Re: the skills needed to use AI to pursue higher-paying jobs and more successful careers.
Both statements can be true, to some extent at least.
Its highly likely simple administration roles, such as those found in call centres and much of the public sector back offices, will be replaceable with a suite of AI agents. Its equally likely that doing so will throw off some much better paid much higher skilled roles in training and tuning those agents, just in lower volumes.
If you're one of those people that can "complete the assigned tasks in 2 or 3 hours" then netflix the day away, then this is your comet.
AI and Bitcoin
The two things boiling the planet for nothing more than powering a hype machine. make me ashamed to be associated with IT (And yet tend to be the two topics people always bring up with anyone in IT)