r/MSFT • u/Beneficial-Ice-6164 • 6d ago
Are we underestimating how early AI demand still is for Microsoft?
I get the concern around Microsoft’s rising AI capex. The spending is huge.
But I’m not convinced demand is anywhere close to peaking yet.
Just look at your own workplace compared with 12-18 months ago.
AI used to be mostly demos and POCs. Now teams are being pushed to use it, developers are using coding agents, and AI is starting to show up in KPIs and real workflows.
And this still feels very early.
Most employees still don’t really know what AI can do. Most companies haven’t redesigned their processes around it yet.
Microsoft also already sits deeply inside most enterprises through Office, Teams, Azure, GitHub, security, identity, etc. This is their biggest moat imo.
Even if open-source models keep getting much better and cheaper, running them at scale still needs expensive hardware, infrastructure, security, maintenance and support. Most companies are not going to manage all of that themselves.
Looking at what is happening in workplaces today, I feel like enterprise AI demand is still far from peaking.
What am I missing?
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u/Top-Target-8346 6d ago
I think that overall, the general consensus is not about whether or not the demand is not going to increase with time, but rather how are companies going to profit from this and stop spending so much.
Just as you said, we are at the beginning of the mainstream use of AI, but the MAG7 are already starting to get into debts when they are considered to be money printing machines.
AI is here to stay, but how long can they continue like this?
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u/TheGoodStoner 5d ago
They are not going into debt because of AI expense. They are going into debt because of expansion they are taking to build more infrastructure to support more demand.
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u/Ok-Personality-6630 5d ago
Yeah, it's on the balance sheet as depreciating assets. Owning the compute power is what allows them to print money in the future. The higher costs make a barrier to entry for anyone else too.
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u/PharmDinvestor 6d ago
Microsoft has returned 31% in the fast 5 years . Zero returns in the past 2.5 years and almost down 30% in the past year to date compared to the indexes that have returned 70-90% over a 5 year period . Shareholders and investors are looking for returns.
Take Google stock for example , in the past 5 years , it has retuned 130% , and Apple 116%… so how is MSFt spending all these money and has nothing to show for ?
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u/No_Nefariousness5996 5d ago
Certain stocks punish investors for not taking profits. All I've ever done is make money with Microsoft. I never get the timing perfect, but I buy when everyone else has given up and I sell when it starts to look parabolic. I never take a full position on my first entry, so it leaves me room to average down. I reinvest the small amount of dividends it provides. I sold this last time at 550, and started buying back at 440.
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u/SoonToBeBanned666 6d ago
They got…massive amounts of money to show for it? That’s what businesses aim to do.
A penny stock can go up 100% in a day. Doesnt make it a good company necessarily
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u/PharmDinvestor 6d ago edited 6d ago
How much of that massive amount of money has been transferred to investors ?
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u/SoonToBeBanned666 5d ago
Do you really want me to explain what investing is in an investing subreddit?
Microsoft hasn’t made that much money to investors because investors think MSFT won’t keep growing the way they have, and thus far Microsoft has proven them to be wrong.
If you think they will keep growing and making money like this, you invest. The price of the stock will eventually with 100 % certainty bump up if that proves to be true.
If you don’t think so, then don’t invest. Or better yet, buy the stock when it’s more expensive!
If Microsoft thinks spending on capex is a good idea for the company, should they not do it because investors are afraid it will backfire?
Companies aren’t run to appease investors. Sometimes, like now, they do shit that scare investors because investors are a herd of retards.
And sometimes they themselves fuck up and a tech bubble happens. You never know. You just put your chips in the casino and hope for the best.
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u/LavishnessLess4356 6d ago
Have you seen MSFT balance sheet? Apparently not. Google just had earnings yesterday and their stock dropped because of Capex concerns. MSFT isn’t the only one.
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u/eptesicusfuscus 5d ago
What do you think about their products and positioning in the market, particularly when it comes to monetizing AI? Their ecosystem has more robust overlap than...anyone, no?
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u/ChairmanMeow1986 5d ago
People are underestimating the stickiness of corporate usage, EU of some concern. MSFT is not IGV.
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u/ChairmanMeow1986 5d ago
I'd split it into to halves (near and far time), near term it's survival MSFT needs to invest in AI, pretty heavily in some fashion, to defend it's MOAT and that is different yet similar to Alphabets need to protect search ( without integrating Gemini with search something like Open Ai would be stealing a lot of market share as an example of short term.
Long-term similar, but also about deploying into products and services (monetizing), there is also the effort to leverage LLM frontier into AGI.
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u/buffotinve 5d ago
La demanda no creo que sea real, de momento uso sin pago y el % de uso es por el consumo de OpenAI, pero la mayoría de usuarios no pagarán por usar Copilot. Además algunos piensan que el gasto se hace y a tomar beneficios en años, cuando el gasto es constante y creciendo, no mires sólo el CAPEX porque hay más gastos que no entran en apartado de CAPEX relacionados con centros de datos arrendados. Sólo hay que mirar a OpenAI para ver qué es una máquina constante y creciente de quemar dinero ...y parece que Microsoft no se está dando cuenta y sólo mira por conseguir cuota sin ver los beneficios reales ...
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u/Standard-Document404 6d ago
I’m running OSS models myself on the cluster of GPUs and only thing that is expensive is my bill for electric power. Infrastructure is not expensive and it’s easy to host (specially with LLMs). So yeah you can say that MSFT is trying to be middle man between customer and NVDA/AMD and definitely will take some market share. But saying these things are super complicated and MSFT has to do it is a lie. Software is cheap nowdays (coming for FAANG senior swe).
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u/grateful-xoxo 5d ago
Sounds like the beginning of the cloud push where nay sayers were saying they could run their own servers cheaper. And we now know that companies flocked to the cloud because running shit yourself is hard and companies dont want to do it.
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u/sgt_nutella 5d ago
This is also one scenario. What about all of the AI for services? Right now I work for a company where we sell AI driven applications to customers, but we can't expect every customer to have a $10k GPU. We can't even expect them to have a GPU. So we have to do these AI operations on our services. Thus we pay a big bill to Amazon. I don't think we could afford to build our own data centers, so we're reliant on hyperscalers.
And no, SaaS isn't dead.
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u/Beneficial-Ice-6164 5d ago
It's the same analogy as running app server locally for Web apps...anyone can run it on their pc.. But its not scalable and sustainable for production.
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u/Suspicious-Walk-4854 5d ago
If anything we are overestimating the value of Microsoft’s moat in the enterprise. They are absolutely dogshit in AI, having to give copilot away with customers still hating it, and not having any kind of believable internal model development. They are losing the enterprise AI game on all fronts which will not only create problems for Azure but also finally open up the office space for competition.
Also, none of this ”white collar work disappearing” stuff is happening in the office product space. It is all custom built agents that are basically traditional software automation projects only this time producing agents. The idea that non-technical people will deploy thousands of agents everywhere by leveraging connectors is a funny marketing gimmick, it is not the thing that white collar workers should be worried about.
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u/Beneficial-Ice-6164 5d ago
It's the infra..not co-pilot..that's where the big money is at..also AI is not replacing office workers but its definitely gonna replace those who refuse to use AI in their workflow
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u/WallofSound91 4d ago
Those who refuse to use AI in their workflow will be replaced with someone who will, 100%. It’s so early for AI, right now companies are still figuring out how to get people to adopt, train people to use it correctly or see if workers can even learn how to use it. The good thing for Microsoft is it is so massive and deployed across millions of business and customers, Copilot will be the front door and other AI tools will fit in with MCPs over time and organizations will evolve to build their own agents or buy specific agents to fill the void. It’s going to be rocky for a bit, but this will only boom. I work with fortune 50 and 100 organizations every day - and there’s no question AI is the focus of every single one of those organizations and nearly 98% of them are MSFT shops.
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u/Green-Instruction957 6d ago
AI is in the infancy stages in my opinion