Microsoft spending on CPUs and GPUs shows sustained demand for Nvidia

Microsoft reported fiscal 2027 first-quarter earnings revealing that about 75% of its quarterly capital expenditures went toward short-lived assets like CPUs and GPUs, showing sustained demand to chip designer Nvidia despite market anxieties regarding tech infrastructure spending.

Microsoft Spending Counters Wall Street AI Anxiety

For months, Wall Street has wrestled with a singular anxiety: are tech giants overspending on artificial intelligence infrastructure? While hardware makers generated explosive growth in the early stages of the boom—propelled by companies like Nvidia dominating the AI chip market—investors grew wary. Over the preceding three calendar years, shares of Nvidia surged more than 1,100%, though they have posted a modest 15% gain so far this year.

Data center sales make up 92% of Nvidia’s total sales. Any cooling off in tech spending threatens that core revenue stream. But Microsoft just offered a clear counter-signal in its fiscal 2027 first-quarter earnings report. According to the report, roughly 75% of Microsoft’s capital expenditures for the period went toward central processing units and graphics processing units.

Nvidia Expands Hardware Footprint Beyond GPU Leadership

Nvidia supplies the fastest graphics processing units around, fueling heavy computational tasks like model training and inference. Inference acts as the core thinking process for addressing problems. By establishing early market leadership through strong customer relationships, a vast product ecosystem, and constant innovation, Nvidia captured the lion’s share of the AI chip market.

The recent Microsoft spending data points to immediate benefits for Nvidia, particularly as the chipmaker broadens its hardware footprint. Having recently introduced its initial stand-alone CPU, Nvidia is now offering these primary computer processors, which represent the traditional computing chips. Before expanding into this sector, Nvidia held little footprint in the CPU market, but transitioned into the space as central processing units became essential components for driving AI agents. Microsoft’s heavy allocation toward CPUs and GPUs directly supports these hardware lines.

Hardware Forecasts for the Second Half

Looking ahead, Microsoft’s spending forecasts suggest the hardware build-out will only gather speed. The tech giant expects capital expenditures to accelerate in the second half of the fiscal year, keeping the focus squarely on CPU and GPU acquisitions. Microsoft forecasts $170 billion in capex for the calendar year.

Microsoft forecasts $170 billion in capex for the calendar year.

This financial commitment isn't speculative. Microsoft builds infrastructure to serve a trend that is already in place rather than chasing hypothetical future demand. As one of Nvidia’s largest customers, Microsoft’s massive cloud business serves a vast array of AI products and services, requiring continuous heavy investment.

More on Microsoft: Microsoft to unveil new Nvidia-powered laptop on Oct 7, Reuters reports · Microsoft and Nvidia Reveal Surface Laptop Ultra and RTX Spark AI Hardware · Microsoft Raises Xbox Console Prices Globally Due to Component Costs