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(Reuters) - Microsoft (MSFT.O)
is planning to invest about $80 billion in fiscal 2025 on developing data centers to train artificial intelligence (AI) models and deploy AI and cloud-based applications, the company said in a blog post on Friday.
Investment in AI has surged since OpenAI launched ChatGPT in 2022, as companies across sectors seek to integrate artificial intelligence into their products and services.
AI requires enormous computing power, pushing demand for specialized data centers that enable tech companies to link thousands of chips together in clusters.
Microsoft has been investing billions to enhance its AI infrastructure and broaden its data-center network.
Analysts expect Microsoft's fiscal 2025 capital expenditure including capital leases to be $84.24 billion, according to Visible Alpha.
The company's capital expenditure in the first quarter of fiscal 2025 rose 5.3% to $20 billion.
As OpenAI's primary backer, the tech giant is considered a leading contender among Big Tech companies in the AI race due to its exclusive partnership with the AI chatbot maker.
More than half of Microsoft's $80 billion investment will be in the United States, Vice Chair and President Brad Smith said in the blog post.
"Today, the United States leads the global AI race thanks to the investment of private capital and innovations by American companies of all sizes, from dynamic start-ups to well-established enterprises," Smith said.
Taiwan's Foxconn (2317.TW, the world's largest contract electronics maker, beat expectations to post its highest-ever revenue for the fourth quarter on continued strong demand for artificial intelligence (AI) servers.
Revenue for Apple's (AAPL.O) biggest iPhone assembler jumped 15.2% to T$2.13 trillion ($64.72 billion), Foxconn said in a statement on Sunday.
It was also ahead of a T$2.1 trillion LSEG SmartEstimate, which gives greater weight to forecasts from analysts who are more consistently accurate.
Robust AI server demand led to strong revenue growth for its cloud and networking products division, said Foxconn, whose customers include AI chip firm Nvidia (NVDA.O).
For smart consumer electronics, which includes iPhones, there was "roughly flattish" year-on-year growth, it said.
Total revenue in December alone reached T$654.8 billion, up 42.3% year on year and the second-highest ever level for the month.
"In the first quarter of 2025, overall operations have gradually entered the traditional off-season," Foxconn said of its outlook for the current quarter.
"Even with record high revenue in the fourth quarter of 2024, the sequential performance of the first quarter will reach roughly similar levels that are average to the past five years; compared with a year ago, it should show significant growth."
The company, formally called Hon Hai Precision Industry, did not elaborate. It does not provide numerical forecasts.
Foxconn's shares jumped 76% last year, outperforming by far a 28.5% rise for the broader Taiwan market (.TWII). They closed down 0.8% on Friday ahead of the revenue data release, compared with a 0.3% gain for the benchmark index.
The company will report its full fourth-quarter earnings on March 14.
- President Joe Biden is set to ban new offshore oil and gas development across 625 million acres (250 million hectares) of U.S. coastal territory, Bloomberg News reported on Friday.
The ban, to be announced on Monday, rules out the sale of drilling rights in stretches of the Atlantic and Pacific oceans and the eastern Gulf of Mexico, said the report, citing unidentified people familiar with the matter.
Biden is leaving the possibility open for new oil and natural gas leasing in the central and western areas of the Gulf of Mexico, which account for around 14% of the nation's production of these fuels, the report said.
The White House did not immediately respond to a Reuters request for comment outside of business hours.
The ban would solidify Biden's legacy on addressing climate change and his goal to decarbonize the U.S. economy by 2050.
The New York Times reported that a section of the law Biden's decision relies on, the Outer Continental Shelf Lands Act, gives a president wide leeway to bar drilling and does not include language that would allow President-elect Donald Trump or other future presidents to revoke the ban.
Biden, Trump and Trump's predecessor, Barack Obama, all used the law to ban sales of offshore drilling rights in some coastal areas.
Trump tried in 2017 to reverse Arctic and Atlantic Ocean withdrawals Obama had made at the end of his presidency, but a federal judge ruled in 2019 that the law does not give presidents the legal authority to overturn prior bans.
- Technology companies are ready for a New Year’s resolution: shaking their addiction to stock-based compensation. Startups strapped for cash but rich in faith that valuations must go up have attracted talent by paying their salaries in shares. Even mature tech giants have trouble just using cash. In 2025, the incentive to keep this up will dwindle as scrutiny rises.
The ultra-low-interest-rate, post-pandemic period turbocharged the habit. Some 121 tech companies went public in 2021, a level last seen ahead of the dotcom bubble. Many were fast-growing but unprofitable; ostensibly saving cash on pay by using headily valued equity held appeal. Given that the BVP Nasdaq Emerging Cloud Index had doubled the year prior, equity likely also seemed a safe bet for employees.
The trend was already set by their more established peers. Among the Russell 3000 Index, stock-based compensation grew about 15% annually between 2006 and 2022, according to Morgan Stanley analysts, far outstripping roughly 4% revenue growth over that time. At $270 billion, it represented as much as 8% of total compensation among U.S. public companies in 2022. It didn’t just accrue to bosses, with 80% of equity pay going to those below the top executives. The information technology sector leaned furthest into the practice.
There will be less incentive to offer generous packages to junior employees. Tech firms, rather than scooping up all the talent they can find, are now retrenching. They notched over 500,000 layoffs since 2022, according to layoffs.fyi.
Management will also get less leeway from investors. After a decade of growth-above-all, profitability is now prized. In 2022, as interest rates rose worldwide, the Emerging Cloud Index halved. The valuation gap between companies exceeding the rule of 40 – a metric combining revenue growth and EBITDA margin to benchmark profitable expansion – and ones that don’t is widening. Sure, companies might exclude stock compensation in adjusted profitability metrics. But issuing equity is not costless, diluting existing holders and reducing earnings per share.
Even $300 billion industry behemoth Salesforce (CRM.N) had to reassure investors in August that its capital return program – that is, buybacks – will “fully offset” dilution from its stock plan. It’s a tortured logic to save upfront only to spend cash flow afterwards on compensation. A majority of shareholders opposed an advisory vote on pay for CEO Marc Benioff and other executives in July. With central banks seen cutting rates more slowly as inflation proves sticky, tech will learn the wisdom of paying in cash.