Microsoft’s ambitious push into artificial intelligence is facing growing investor doubts as the company prepares to release its latest earnings report. Despite heavy investment in OpenAI and plans to spend $80 billion on AI infrastructure this fiscal year, its Azure cloud business has shown slowing growth for two consecutive quarters. Analysts now question whether AI-driven demand will be enough to reignite momentum.
The tech giant’s stock has underperformed many of its peers, with further pressure mounting after Chinese startup DeepSeek introduced a cost-effective AI model, sparking concerns about US dominance in the sector. Meanwhile, Microsoft’s AI-powered Copilot assistant has struggled to gain widespread traction beyond pilot programmes, forcing the company to adjust pricing strategies in an attempt to drive adoption.
While Microsoft still handles most of OpenAI’s cloud traffic, competition in AI infrastructure is intensifying. With investor sentiment turning cautious, the upcoming earnings report will be a key test of whether AI investments can translate into sustainable revenue growth.
Global technology stocks experienced a sharp decline on Tuesday, with a second day of losses triggered by the emergence of a low-cost Chinese AI model. This new AI assistant, launched by China’s DeepSeek, has raised doubts about the dominance of established AI leaders like Nvidia and OpenAI. Nvidia’s shares plummeted 17% on Monday, erasing $593 billion from its market value. Other major tech companies such as Broadcom, Microsoft, and Alphabet also saw significant declines, fueling broader market concerns.
The unexpected launch of DeepSeek’s AI, which claims to use fewer data and lower costs than existing models, has disrupted the market, causing scepticism among investors. While OpenAI CEO Sam Altman praised the model, calling it ‘impressive,’ the sudden rise of a competitor from China has surprised many and highlighted the rapid pace of advancements in AI technology. This development has led to a global sell-off in tech stocks, with significant drops in companies across the US, Europe, and Japan.
The sell-off has raised concerns about the high valuations of AI and tech stocks, which have seen inflated prices due to the AI boom. Nvidia, for example, had been trading at nearly 60 times its earnings, far above the broader market’s 22 times. The market downturn underscores the risks tied to the heavy concentration of tech stocks in investor portfolios, with many fearing that the industry’s rapid expansion has created an unsustainable bubble.
This market shakeup also reflects the broader issue of leverage in the system, with investors increasingly borrowing to buy high-priced tech stocks. As a result, the unwinding of these positions, combined with algorithmic trading, has intensified the sell-off. With key earnings reports from companies like Apple and Microsoft expected this week, investors are closely watching how tech executives address concerns about capital spending and the future of AI investments.
Microsoft’s upcoming quarterly forecast will reveal whether its significant investments in AI, including its partnership with OpenAI, drive growth in its key Azure cloud business. Despite earlier optimism, Azure’s growth has slowed for two consecutive quarters, and investors are anxious about Microsoft’s ability to monetise AI. The company has committed about $80 billion in capital spending this year, but doubts linger over the effectiveness of its strategy, especially after a sharp drop in stock price following the launch of a competitive AI model by Chinese startup DeepSeek.
Azure, which contributes around a third of Microsoft’s revenue, is expected to show 31.8% growth in the second quarter, a slight slowdown from the previous quarter. Microsoft’s relationship with OpenAI remains a key growth driver, with Azure set to handle much of OpenAI’s cloud traffic. However, investor sentiment has soured, with growing concerns about AI monetisation, margins, and capital expenditure. Microsoft also faces the impact of a stronger dollar, which could hurt its international earnings.
In addition to Azure, Microsoft is banking on the success of its Microsoft 365 Copilot AI assistant, but adoption has been slower than anticipated. To stimulate demand, the company has adjusted its pricing, adding AI features to lower-tier Microsoft 365 plans. While the Copilot’s potential remains high, analysts project a modest penetration rate of 10%, suggesting it could add significant revenue in the coming years. Despite these challenges, Microsoft’s productivity division, which includes 365 Copilot and LinkedIn, is expected to see continued growth.
Overall, Microsoft is forecasted to report slower growth for the second quarter, with revenue expected to rise by 10.9% compared to 16% in the first quarter. Net profit is also projected to increase at a slower pace, raising questions about whether the company’s AI investments will pay off as anticipated.
Microsoft-backed OpenAI is seeking to prevent some of India’s largest media organisations, including those linked to Gautam Adani and Mukesh Ambani, from joining a copyright lawsuit. The case, initiated by news agency ANI last year, involves claims that AI systems like ChatGPT use copyrighted material without permission, sparking a wider debate over AI and intellectual property in the country. India ranks as OpenAI’s second-largest market by user numbers, following the US.
OpenAI has argued its AI services rely only on publicly available data and adhere to fair use principles. During Tuesday’s hearing, OpenAI’s lawyer opposed bids by additional media organisations to join the case, stating he would submit formal objections in writing. The company has also challenged the court’s jurisdiction, asserting that its servers are located outside India. The case is scheduled to continue in February.
The Federation of Indian Publishers has accused ChatGPT of harming their business by summarising books from unlicensed online sources. OpenAI denies these claims, maintaining its tools do not infringe copyright. Prominent digital media groups, including the Indian Express and Hindustan Times, allege ChatGPT scrapes and reproduces their content, prompting their involvement in the lawsuit.
Tensions escalated over media coverage of the case, with OpenAI objecting to reports based on non-public court filings. Lawyers representing media groups called such claims unfounded. The lawsuit is poised to shape the future of AI and copyright law in India, as courts worldwide grapple with similar challenges.
Microsoft and OpenAI are investigating whether a group linked to Chinese AI startup DeepSeek accessed OpenAI data without authorisation. Bloomberg News reported that Microsoft’s security team detected large-scale data transfers last autumn using OpenAI’s application programming interface (API).
Microsoft, OpenAI’s largest investor, flagged the suspicious activity to the AI firm. DeepSeek, a low-cost Chinese AI startup, gained attention after its AI assistant surpassed OpenAI’s ChatGPT on Apple’s App Store in the US, causing a selloff in tech stocks.
White House AI and crypto adviser David Sacks suggested DeepSeek may have stolen US intellectual property by extracting knowledge from OpenAI’s models. An OpenAI spokesperson acknowledged that foreign firms frequently attempt to replicate its technology and stressed the importance of government collaboration to protect advanced AI models.
Microsoft declined to comment on the matter, while DeepSeek was unavailable for a response. OpenAI stated it actively counters unauthorised attempts to replicate its technology but did not specifically name DeepSeek.
Several prominent Indian media outlets, including those owned by billionaires Gautam Adani and Mukesh Ambani, are taking legal action against OpenAI. These outlets, such as NDTV and Network18, along with organisations like the Indian Express and Hindustan Times, have filed to join an ongoing lawsuit against OpenAI in a New Delhi court. They allege that OpenAI has been improperly scraping their copyrighted content to train its AI model, ChatGPT, without permission or payment.
The legal claim, which is being led by the Digital News Publishers Association (DNPA), argues that OpenAI’s practices pose a significant threat to the copyrights of its members. The publishers claim that OpenAI’s actions amount to ‘wilful scraping’ and the use of their work for commercial gain, especially as the company generates revenue through ads linked to AI-generated content. This lawsuit highlights broader concerns in the media industry about the influence of large tech companies on content distribution and monetisation.
The legal proceedings are part of a larger global trend, with authors, musicians, and news organisations worldwide suing AI firms for using their works without compensation. In the US, the New York Times has filed a similar lawsuit against OpenAI and its major backer, Microsoft. This new case in India adds significant pressure to OpenAI, which has denied the allegations, arguing that its AI systems rely on publicly available data and that deleting such data could violate US law.
The Indian plaintiffs argue that OpenAI’s failure to strike content-sharing deals with local publishers, while it has done so with international media outlets, undermines the business of Indian news companies. The publishers warn that OpenAI’s practices could weaken the media landscape and negatively impact democracy, calling for greater protection of intellectual property in the age of AI.
The initial phase includes a 200-megawatt data centre, with future plans to expand capacity to 1.2 gigawatts. At least 57 full-time jobs are expected at the site, offering average annual salaries of US$57,600.
Abilene’s development underscores Texas’s growing importance in AI and digital infrastructure, marking a significant milestone in the Stargate initiative.
OpenAI has launched an advanced AI agent, Operator, designed to automate repetitive online tasks such as ordering groceries or booking restaurants. Operator uses its own browser to interact with buttons, menus, and text fields, removing the need for custom API integrations.
The tool operates independently once enabled, but it is designed to seek user approval for actions involving sensitive information like logins or payments. Its functionality relies on OpenAI’s GPT-4o vision model and advanced reasoning capabilities, allowing it to self-correct mistakes or transfer control back to users when needed.
Operator is currently in a research preview phase, available exclusively to US-based ChatGPT Pro subscribers. Feedback from early adopters will shape its future development before it becomes accessible to more users.
OpenAI is collaborating with companies including DoorDash, Uber, and StubHub to align Operator with real-world needs and industry norms, ensuring practicality and reliability for diverse applications.
Stargate, a new joint venture formed by OpenAI, SoftBank, and Oracle, aims to build data centres across the US to support the growing demands of AI. According to a report by the Financial Times on Thursday, these data centres will be dedicated solely to OpenAI, the company behind the popular ChatGPT. The collaboration between these tech giants underscores the increasing importance of robust infrastructure to power the next wave of AI innovation.
The exclusive focus on OpenAI’s needs comes when AI technologies rapidly expand, with the demand for high-performance computing capabilities soaring. The partnership will allow OpenAI to scale its operations and provide the necessary computing power for its cutting-edge AI models. As companies worldwide race to develop more advanced AI tools, the infrastructure provided by Stargate is expected to play a crucial role in supporting the next generation of AI services.
Oracle and SoftBank’s involvement brings significant expertise in cloud infrastructure and global telecom, making the venture a powerful alliance in the competitive AI landscape. The project highlights the growing intersection of cloud computing, data storage, and AI as companies like OpenAI push the boundaries of what AI can achieve.
Meta Platforms has joined a $10 billion investment round for Databricks, a data analytics firm specialising in AI applications. The funding, which closed on Wednesday, values the San Francisco-based company at $62 billion. This round also included a $5.25 billion credit facility led by major financial institutions such as JPMorgan Chase and Goldman Sachs, aimed at boosting Databricks’ expansion and product development efforts.
Founded in 2013, Databricks provides tools to help businesses process, analyse, and apply artificial intelligence to complex datasets. The firm has benefited from the increasing corporate demand for AI technology, catalysed by the rapid adoption of platforms like OpenAI’s ChatGPT. Meta’s investment strengthens an existing partnership between the two, particularly in leveraging Meta’s Llama, a family of open-source large language models.
With over 10,000 organisations, including Shell and Comcast, already utilising its platform, Databricks is at the forefront of enterprise AI applications. According to CEO Ali Ghodsi, this deepened collaboration with Meta will help Databricks better serve enterprise clients using Llama, further solidifying its position in the AI race.
