Tech giant Microsoft (MSFT) is planning to rely more on its own custom chips in the future, according to Chief Technology Officer Kevin Scott. Right now, Microsoft mostly uses chips from Nvidia (NVDA) and AMD (AMD) in its data centers, especially for AI-related tasks. Indeed, Scott explained at Italian Tech Week that the company chooses whichever chip offers the best performance for the price, and so far, that’s usually been Nvidia. However, the company is already taking steps toward Microsoft-made silicon.
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In fact, Microsoft introduced two of its own chips in 2023: the Azure Maia AI Accelerator, built for AI work, and the Cobalt CPU. It is also working on next-generation versions of these chips and recently showed off a new chip-cooling method using “microfluids” to help prevent overheating. Interestingly, Scott explained that this move isn’t just about chips but about controlling the entire data center system. That way, everything can be fine-tuned to get the best performance for AI tasks.
Unsurprisingly, the push for custom chips comes as demand for AI computing keeps growing faster than expected. Companies like Meta (META), Amazon (AMZN), Alphabet (GOOGL), and Microsoft are on track to spend over $300 billion this year, with much of the spending going toward supporting AI. Even with all the new data centers Microsoft has built so far, Scott said it’s still not enough to keep up with the demand. As a result, he stated, “Even our most ambitious forecasts are just turning out to be insufficient.”
Is MSFT Stock a Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 33 Buys and one Hold assigned in the last three months. In addition, the average MSFT price target of $627.95 per share implies 21.2% upside potential.
