My biggest impressions from the article
Microsoft shares slid about 10% on Thursday following an earnings report that disappointed some investors, prompting the stock’s sharpest daily decline since March 2020.
Microsoft’s finance chief, Amy Hood, argued that the cloud result could have been higher if it had allocated more data center infrastructure to customers rather than prioritizing its in-house needs.
“If I had taken the GPUs that just came online in Q1 and Q2 in terms of GPUs and allocated them all to Azure, the KPI would have been over 40,” she said.
Analyst Ben Reitzes of Melius Research, with a buy rating on Microsoft stock, said during CNBC’s “Squawk on the Street” on Thursday that Microsoft should double down on data center construction.
“I think that there’s an execution issue here with Azure, where they need to literally stand up buildings a little faster,” he said.
LMAO, the analysts and C level execs are going to accelerate the fall of Micro$lop.
This is 98% chance a lie. Refusing azure clients wasn’t happening. They are saying the dedicated GPUs to copilot 365/windows/bing, but they would just slow tokens/second delivery or raise prices if they were constrained. Open AI/copilot service is flattening out is the far more likely explanation, and China/Anthropic/Google gaining share is apparent with frontend and LLM innovation.
That said, windows 11 copilot is going at about 7tps on simple queries about its QOS, and slow service of paid models could impact azure. In Nov 25, they did drop big customer volume discounts. There were big price increases earlier in the year, so growth was in part pricing growth, and likely a drop in usage volume from previous quarter, or at least very stable. The AI frenzy, mostly openAI/msft/oracle/coreweave block of absurdly impossible capacity growth depends on keeping up with supposedly massive (token) demand growth. There are still a lot of free alternatives in the space, and app download figures usually accompany free promotional usage of latest breakthrough model (sora2 was free use on release. kilo code this week has free Kimi K2.5. Other coding tools have fully free or generous free tiers)
Overall, this, and highly promotional industry, means its very hard for datacenter/LLMs to meet the hype. Deepseek 4 is hyped as a big leap forward, to be released in a couple of weeks. Everything AI boom is likely a lie, and Nvidia bribing Trump to sell H200s to China, at 25% export tariff, is proof of incapacity or unwillingness of US industry to deploy them.
I’d love for you to be right (I’d like to see nvidia compete as an underdog since they are fairly anticompetitive in their dominant position) but think this reasoning is flawed.
Wanting to sell to China just means that demand isn’t exceeding supply, or maybe even that they have access to more supply that they’d use if they could sell to China, which is a massive market. Or even if they don’t have any excess supply, higher demand means they can set higher prices and still expect to sell all inventory.
Like the US car companies wanting to sell cars in China doesn’t imply that they are unable to sell cars in the US, it just means they want to sell cars to China and the US.
I agree with the rest of your comment and think it was well said, sorry about this nitpick.