Microsoft shares surged 5.23% on Tuesday to $413.65, making it the biggest gainer in the S&P 500, after the company reported a breakthrough in its Azure AI infrastructure capacity.
Why it matters: Microsoft’s capital spending reveals the scale of the AI infrastructure race. At more than $120 billion this year, it is the largest single-year investment by any technology company in history.
The numbers
Microsoft is on a quarterly run rate of $37.5 billion in capital expenditure, putting it on track to exceed $120 billion for fiscal 2026. Half goes to GPUs and CPUs that power AI workloads. The other half funds data centre construction with 15- to 20-year operational horizons.
Azure revenue grew 40% year over year in the most recent quarter, outpacing the broader cloud market.
Demand still exceeds capacity
Despite the record spending, Microsoft disclosed an $80 billion backlog of Azure orders it cannot fulfil because of power constraints. The company is building “Stargate”-class data centres capable of 5 to 10 gigawatts of power to close the gap.
In Japan, Microsoft announced a $10 billion investment from 2026 through 2029 to expand AI infrastructure, including GPU-based compute services with data residency guarantees.
The debate
Analysts remain split on whether the spending will pay off. Bulls point to Azure’s growth rate and the stickiness of enterprise AI contracts. Bears warn that capital expenditure of this scale compresses margins and leaves little room for error if AI demand slows.
Microsoft’s stock is up from a low of $374 earlier in April but remains below its 2025 peak.