Microsoft Corporation MSFT has pushed back against concerns about its AI infrastructure spending after a report said the company canceled data center leases, leading to investor panic and a market sell-off.
Now, tech analyst Dan Ives dismissed the fears as “more smoke than fire,” saying that Microsoft’s long-term AI investment strategy remains intact.
What Happened: On Friday, TD Cowen analysts circulated a report stating Microsoft had canceled leases with at least two private data center operators.
However, on Monday, Microsoft told CNBC that its $80 billion AI infrastructure investment remains on track, stating, "While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions."
On the same day, Ives, Wedbush's global head of technology research, dismissed the panic, stating, "Microsoft does this all the time. They foreshadowed it even on the conference call. This is more smoke than fire."
He added, "Any sell-off here, this is a name that's way oversold, and nothing here in any way makes us nervous."
Why It's Important: Investor anxiety surrounding AI infrastructure spending has been heightened by DeepSeek's low-cost model R1's rise. As per DeepSeek, the model is built for under $6 million and outperformed leading U.S. models, including those from OpenAI.
Despite that, Ives remains bullish on Microsoft and Nvidia Corporation NVDA, arguing that demand for AI computing remains strong.
DeepSeek caused Nvidia to drop 17% in a single session. Since Jan. 27, Nvidia shares have rebounded 10.02%, while rival Advanced Micro Devices AMD has declined 6%.
Nvidia's upcoming earnings report on Wednesday, Feb. 26 is expected to provide further clarity, with Ives predicting a $2 billion revenue beat.
This year, big tech is ramping up AI investments, with Amazon, Meta, Microsoft, and Alphabet pouring a record $320 billion into AI infrastructure, up from $246 billion in 2024.
Amazon leads with over $100 billion, while Microsoft and Alphabet each plan around $80 billion, and Meta commits more than $60 billion.
Price Action: Microsoft's stock closed at $404 on Monday, dropping 1.03% for the day. Year-to-date, it is down 3.48%, and over the past 12 months, it has declined 0.87%, according to Benzinga Pro.
Photo Courtesy: dotshock on Shutterstock.com
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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