Microsoft Corp (NASDAQ: MSFT) stock is experiencing gains on Friday as it highlights the significant role of graphics processing units (GPUs) as a critical raw material for its expanding cloud business, specifically in enabling AI capabilities.
The company’s annual report addressed GPUs as a risk factor, citing potential outages if the necessary infrastructure is not acquired, according to CNBC.
The increasing popularity of generative AI, which is known for producing human-like text, speech, videos, and images in response to user input, has led to a surge in demand for GPUs among top technology companies.
OpenAI’s ChatGPT frenzy has contributed to this GPU demand, benefiting companies like Nvidia Corp (NASDAQ: NVDA) and Advanced Micro Devices, Inc (NASDAQ: AMD).
Microsoft’s data centers heavily rely on GPUs and other components such as servers and networking supplies to meet the rising demand for AI-related computations and services.
Although other major technology companies’ recent annual reports, such as Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL), Amazon.Com Inc (NASDAQ: AMZN), and Meta Platforms Inc (NASDAQ: META), do not mention GPUs in the same context, Microsoft’s report underscores their growing importance.
By collaborating with OpenAI and utilizing its Azure cloud for ChatGPT and other AI models, Microsoft has significantly increased its need for GPUs.
To secure sufficient GPU capacity, Microsoft has expanded its search beyond its data centers and established an agreement with CoreWeave, a cloud service provider that rents out GPUs to third-party developers.
Moreover, Microsoft is developing its custom AI processor and anticipates a boost in capital expenditures, including investments in data centers, CPUs, networking hardware, and GPUs, to support overall capacity expansion.
In its latest earnings report for the fourth quarter, Microsoft achieved a revenue of $56.2 billion, an 8% year-over-year increase, surpassing the Street consensus estimate of $55.47 billion. The company also reported earnings per share of $2.69, exceeding the Street estimate of $2.55.
Microsoft emphasized its dedication to the new AI platform shift.
The session volume for Microsoft reached 16 million, compared to a 100-day average of 29 million.
As of the last check on Friday, MSFT shares were trading higher by 2.46% at $338.81.