Microsoft Investors Worried About Excessive AI Spending

Microsoft investors are growing concerned about the company's spending on artificial intelligence. Stock prices have been affected, with investors feeling that the company is prioritizing AI over other areas. The concerns come as Microsoft has made significant investments in AI research and development.

Microsoft's (MSFT) commitment to artificial intelligence (AI) has been a significant focus for the company, with substantial investments in various AI initiatives. However, these investments have raised concerns among investors, who question whether Microsoft is prioritizing AI at the expense of other business areas. The company has recently allocated over $33 billion to AI data center capacity shortages, with significant deals involving companies like Nebius (NBIS), CoreWeave (CRWV), Nscale, and Lamabada Update: Market Chatter: Microsoft Commits $33 Billion to Neocloud Firms for AI Capacity^[1].

One of the most notable agreements is Microsoft's partnership with Nebius, valued at up to $19.4 billion. This deal provides Microsoft with access to over 100,000 Nvidia (NVDA) GB300 chips, which are crucial for building large language models and consumer AI assistants Update: Market Chatter: Microsoft Commits $33 Billion to Neocloud Firms for AI Capacity^[1]. The agreement has significantly boosted Nebius' stock, with shares closing 8.9% higher on Thursday and up about 2% in premarket activity on Friday Update: Market Chatter: Microsoft Commits $33 Billion to Neocloud Firms for AI Capacity^[1]. CoreWeave, another beneficiary of Microsoft's AI investments, also saw a 1% increase in its stock price Update: Market Chatter: Microsoft Commits $33 Billion to Neocloud Firms for AI Capacity^[1].

The impact of these investments on Microsoft's stock has been mixed. While the company's AI initiatives are seen as strategic long-term plays, some investors are concerned about the short-term financial implications. Microsoft's stock price has been volatile, reflecting these concerns. For instance, Nebius' stock has soared from around $14.29 in October 2024 to approximately $110 on 2 October 2025, approaching its record high of $117.65 Nebius Group Stock Soars on Microsoft AI Deal, $3B Funding Plan & Analyses: What You Need to Know on 2 October 2025^[2]. This rapid growth has been driven by the Microsoft deal, which has been seen as a significant validation of Nebius' AI cloud platform Nebius Group Stock Soars on Microsoft AI Deal, $3B Funding Plan & Analyses: What You Need to Know on 2 October 2025^[2].

Despite the positive outlook, analysts caution that Nebius is still pre-profit and will continue to burn cash as it scales. The company's growth trajectory is aggressive, with analysts expecting revenue to surge to $4.25 billion by 2027, a compound annual growth rate of 231% Nebius Group Stock Soars on Microsoft AI Deal, $3B Funding Plan & Analyses: What You Need to Know on 2 October 2025^[2]. However, this growth comes with risks, including potential dilution of existing shareholders due to the company's need for continuous capital raising Nebius Group Stock Soars on Microsoft AI Deal, $3B Funding Plan & Analyses: What You Need to Know on 2 October 2025^[2].

Investors should also consider the broader context of Microsoft's AI spending. While the company's AI investments are substantial, they are part of a larger strategy to stay competitive in a rapidly evolving technological landscape. Microsoft's AI initiatives, including the partnership with Nebius, are seen as long-term revenue anchors and validation of the company's AI cloud platform Nebius Group Stock Soars on Microsoft AI Deal, $3B Funding Plan & Analyses: What You Need to Know on 2 October 2025^[2].

In conclusion, Microsoft's AI investments have had a mixed impact on its stock price, with some investors concerned about the company's spending priorities. However, the strategic value of these investments cannot be overlooked. The partnership with Nebius, in particular, positions Microsoft to outsource a portion of its AI workloads and attract additional hyperscaler or AI lab customers. As with any investment, careful consideration of the risks and potential rewards is essential.