Microsoft plans to invest $80 billion in building AI-enabled data centers during the 2025 fiscal year, a significant increase compared to its $53 billion capital expenditure in 2023. Brad Smith, Microsoft’s president, shared the news in a blog post on Friday, where he also emphasized the need for the U.S. government and tech companies to ensure that American AI technology remains dominant globally, countering alternatives from China.
Smith highlighted the progress of AI companies like OpenAI—into which Microsoft has invested billions over the past two years—alongside other firms such as Anthropic and Elon Musk’s xAI. He noted that the success of these companies wouldn’t have been possible “without new partnerships founded on large-scale infrastructure investments that serve as the essential foundation of AI innovation and use.”
Smith outlined that Microsoft is set to allocate approximately $80 billion in FY 2025 to develop AI data centers for training models and deploying AI and cloud-based applications worldwide. Over half of this investment will be directed toward the United States, underscoring Microsoft’s confidence in the U.S. economy and its ongoing commitment to the country.
The $80 billion investment will further expand Microsoft’s already significant data center infrastructure, which had a reported 5GW capacity as of April 2024. The company plans to add another 1.5GW in the first half of 2025. However, OpenAI has reportedly explored partnerships with other providers, as Microsoft struggles to meet the growing demands for computing power to support services like ChatGPT and Azure.
Smith also used the post to urge the U.S. to secure its position in the global AI race, particularly as competition from China heats up. He pointed to the ongoing tech trade war between the U.S. and China, in which the U.S. has restricted Chinese access to key components like Nvidia chips. In response, China has been ramping up its own AI capabilities, offering subsidized chips and building local AI data centers in emerging markets.
Smith warned that China’s strategy mirrors its past success in telecoms infrastructure, where Chinese company Huawei became a dominant global player, particularly in developing countries. “Initially, American and European companies such as Lucent, Alcatel, Ericsson, and Nokia built innovative products that defined international standards,” Smith noted. “But as Huawei invested in innovation and China’s government-subsidized sales of its products, especially across the developing world, adoption of these Chinese products outpaced the competition and became the backbone of numerous countries’ telecommunications networks.”
He cautioned that China is now aiming to replicate this strategy with AI, potentially influencing global standards. To counter this, Smith stressed that the U.S. must act swiftly and decisively to ensure American AI technologies take the lead, echoing the need for global collaboration to promote U.S.-based AI systems: “The best response for the United States is not to complain about the competition but to ensure we win the race ahead. This will require that we move quickly and effectively to promote American AI as a superior alternative. And it will need the involvement and support of American allies and friends.”
