What is preventing the revolution in AI? In the competition for leadership in artificial intelligence, even the biggest IT firms are facing three different obstacles.
These days, generative artificial intelligence (AI) is quite popular, and some of the biggest technology companies in the world are focusing their futures on AI tactics. However, there are significant business risks associated with game-changing AI. Before investing in AI stocks, including Microsoft (NASDAQ: MSFT), you should consider management’s concerns. The tech giant is not hesitant to share its risk analysis on the subject with the public.
Microsoft’s approach to discussing the hazards of AI
Five of the “Magnificent Seven” firms’ earnings calls during the first three quarters of 2024 covered AI-related issues, according to a recent Motley Fool study.
Microsoft stood up as a prominent investigator of risk variables, but none of the tech giants devoted much conference call time to AI threats.
Amazon (NASDAQ: AMZN) largely discussed the expensive setup costs of sophisticated AI services, devoting only 4% of its AI mentions to risk considerations. Apple (NASDAQ: AAPL) allowed even less room for risk-related conversations, with only 3% of mentions focusing on how stringent restrictions are impeding the adoption of Apple’s AI tools.
Using a different strategy, Microsoft focused 10% of its AI mentions on risk analysis. In general, the company’s AI discussions were almost exclusively focused on the Copilot AI assistant tool and the Azure cloud computing platform. The risk conversation remained within these boundaries to create a theme of high demand that makes it difficult to fulfill every request for Azure and Copilot AI services.
Risk 1: Establishing AI infrastructure is a costly and enormous undertaking
Microsoft CEO Satya Nadella is not shocked by the surge in demand for generative AI services, but real-world constraints make it tough to capitalize on that demand.
“We have run into obviously lots of external constraints because this demand all showed up pretty fast, right?” Nadella stated during the October 2024 Q1 2025 earnings call. “We encountered a number of limitations, which are crucial since [data centers] (DCs) are not constructed overnight. Then there are DCs. Power is present. Thus, that has served as a type of temporary limitation.
Although it takes time and money to secure large-scale electric power feeds and develop a substantial amount of data center capacity, Microsoft is creating assets with enormous long-term value.
Risk 2: The increasing demand for AI is difficult to meet.
Even with its massive corporate size and substantial infrastructure expenditures, Microsoft still struggles to meet the growing AI demand.
As stated by CFO Amy Hood in the April 2024 call, “near-term AI demand is a bit higher than our available capacity.”
Hood clarified three months later that Azure’s AI demand “remained higher than our available capacity.”
Nadella emphasized the “constraints” preventing Microsoft’s AI business from progressing on the October call. Hood said on the same call that “demand continues to be higher than our available capacity.”
Going straight to the call from last month’s second quarter, Hood merely restated her October demand analysis. Orders for Azure’s cloud-based computing capability relevant to AI are constantly coming in.
Risk 3: DeepSeek and other emerging rivals
The current leaders in AI are facing competition from the Chinese DeepSeek engine. A small team may provide AI outcomes on par with the big-budget leaders with a low computing hardware expenditure. Of course, DeepSeek received more than 8% of Microsoft’s total AI discussion on the second-quarter call.
The AI market is growing similarly to the old-school computing business, according to Nadella. New developments lower costs and raise the caliber of computer services, and the market as a whole is constantly adjusting to a steady flow of revolutionary changes.
Nadella stated, since that everything is commoditized, it will be widely utilized, Customers are the main winners in any software cycle like that.
Thus, DeepSeek poses fresh challenges to Microsoft’s AI division, but it is also a typical and beneficial component of this developing market. We’re going to see what happens when tech companies with enormous financial resources use the same technology that was so effective at DeepSeek’s limited scale.
The DeepSeek technique and other unforeseen problems may ultimately improve AI technologies, ranging from the phone in your pocket to large-scale cloud solutions. Just like you are not utilizing Pentium processors or Windows 3.1 in 2025, you won’t be limited by today’s AI quality in the long run.
Progress is unstoppable. It can only be slowed down. Why would you want to, though?
