Microsoft Plans Doubling Data Centres Amid Record $35B AI Investment

Microsoft is aggressively increasing its spending on artificial intelligence and cloud infrastructure to capitalize on the surging demand for AI services. In the first fiscal quarter of 2026, Microsoft reported a record capital expenditure of nearly $35 billion, nearly half of which was spent on high-cost components like Nvidia chips to address capacity bottlenecks in its Azure cloud business. This investment has driven a 40% growth in Azure revenue, surpassing analyst expectations, with a forecasted 37% increase for the current quarter. CEO Satya Nadella highlighted plans to double Microsoft’s data center footprint over the next two years and boost AI capacity by more than 80% this year, underscoring the company's commitment to maintaining leadership in AI technology. Despite strong revenue growth and strategic partnerships, such as the significant stake Microsoft took in OpenAI, investor concerns persist over the sustainability of these massive investments, especially amid limited evidence of AI-driven productivity gains and recent operational challenges like an Azure outage. Consequently, Microsoft shares fell over 3% following the earnings announcement, reflecting market apprehension about the high costs and potential risks associated with the AI expansion.