Microsoft’s (MSFT) plans to spend $80 billion is another boost for the artificial intelligence sector. The software giant plans to invest in data centers in fiscal 2025.
Microsoft needs more hardware to power AI. The company said that it needs large-scale infrastructure investments to serve as the essential foundation of AI innovation and use. Microsoft will spend half of its investment in the U.S. The news would support Trump’s “America first” business message.
The infrastructure investment also lifts Nvidia's (NVDA) and Advanced Micro Devices (AMD) prospects. Servers require GPU chips to power the servers.
Nvidia the Biggest Winner
Microsoft has a big hardware bet that may not pay off. It needs the adoption of ChatGPT and CoPilot to increase. If Office 365 subscribers do not buy the AI service, too, then margins will fall. Conversely, Nvidia will sell more GPU regardless of the demand for AI.
Fortunately, Microsoft anticipates that the demand for Azure cloud service will increase, so AI solutions are complementary.
Nuclear power suppliers benefit from Microsoft’s investment. AI servers require lots of electricity. Constellation Energy (CEG) and Vistra Energy (VST) are two firms that investors should continue to accumulate.
Your Takeaway
MSFT stock is stuck in a wide trading range at between $410 - $450. Shares will not break out until subscriptions of CoPilot accelerate.
