Microsoft Corp. has made a significant commitment by investing over $60 billion into neocloud data center companies, indicating its urgency to secure adequate computing capacity for artificial intelligence (AI) developments. This substantial financial commitment includes approximately $23 billion allocated to the British startup Nscale. This arrangement would provide Microsoft with access to around 200,000 of Nvidia Corp.’s latest GB300 chips located in various sites across the UK, Norway, Portugal, and Texas.
The software giant is facing challenges in rapidly establishing data centers to meet the growing demands from both external customers and internal teams focused on developing AI tools. To mitigate this issue, Microsoft has opted to partner with smaller third-party infrastructure providers known as neoclouds, which also encompass firms like CoreWeave Inc. and Nebius Group NV. Notably, the company’s spending on these services has nearly doubled since the beginning of October.
Recently, Microsoft disclosed two additional neocloud contracts worth over $10 billion. Among these is a $9.7 billion agreement with the Australian firm Iren Ltd. to rent chip access, along with a multibillion-dollar deal with Lambda Inc. These partnerships typically span five years.
A Microsoft spokesperson highlighted that the company’s global infrastructure strategy is designed to be flexible and responsive to both immediate and anticipated demand, capitalizing on a combination of owned data centers, leased sites, and agreements with third-party providers to quickly scale operations worldwide.
One of the critical hurdles identified by CEO Satya Nadella is not a shortage of chips, but rather limitations in power availability, which presents a significant bottleneck. Competing cloud services, like those from Amazon and Google, have not pursued partnerships with neoclouds to the same extent as Microsoft, although Google has been working with CoreWeave for its collaboration with OpenAI.
In its recent quarterly report, Microsoft noted a substantial increase in its overall spending—approximately $35 billion—primarily focused on data center leases and essential equipment such as servers. Analysts suggest that Microsoft’s ongoing agreements with neoclouds further illustrate a critical capacity crunch across the industry, spurred by soaring demand for AI capabilities.
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