Microsoft's Cloud Capacity Crisis

Microsoft is racing to meet the soaring demand for cloud computing and AI services. The company plans to triple its global data-center footprint from 12 gigawatts to over 38 gigawatts by 2032.

The expansion is driven by a shortage of computing capacity, which has already forced Microsoft to turn away some customers and limit usage on its Xbox cloud-gaming service.

Currently, about 2 gigawatts are dedicated to AI, but this will increase to one-third of the total 38-gigawatt footprint by 2032. The cost of this expansion is significant, and investors must consider whether Microsoft can build capacity fast enough without ending up with excess capacity.

Microsoft's growth in cloud computing and AI services has been rapid, but it appears that demand is outpacing supply. Server shortages have led to service outages, such as an eight-hour outage on GitHub in August.