Fresh off Microsoft’s new agreement with OpenAI—in which the artificial intelligence company agreed to buy $250 billion of cloud services from the enterprise software company’s Azure unit—Microsoft president and vice chair Brad Smith, perhaps unsurprisingly, is bullish about the long-term future of AI. But he did inject one brief note of caution in a conversation with Fortune at Web Summit in Lisbon on Tuesday.
“I obviously can’t speak about every other agreement in the AI sector. We’re focused on being disciplined but being ambitious. And I think it’s the right combination,” he said.
“Everybody’s going to have to be thoughtful and disciplined. Everybody’s going to have to be ambitious but grounded. I think that a lot of these companies are [doing that].”
“We feel good about where we are with OpenAI. We feel good about the investments we’ve made,” Smith said.
Although OpenAI is well-capitalized—Microsoft’s stake alone, for which it paid $13 billion, is now 27% of the company’s $500 billion valuation—the startup’s $250 billion commitment is far greater than its revenues. And Microsoft just marked down the value of its investment in OpenAI in an accounting move that implies OpenAI lost $12 billion in the most recent quarter.
Fortune asked Smith if this was sustainable. Is AI a bubble?
“From a long-term perspective. I think the answer is no,” he said. “I think that we’ve got years, if not decades, ahead of us for growth. From a short-term perspective, I’ll only speak for Microsoft; I can’t speak for every company in the industry. We have more demand than supply. That’s the reality from customers, and we have an ongoing pipeline of demand and needs, and we see steady growth, and we’re encouraged by where things are going. And we’ll always be disciplined as we’re investing.”
“We see ongoing growth in demand. That’s what we’ve seen over the past year. That’s what we expect today, and frankly our biggest challenge right now is to continue to add capacity to keep pace with it.”
Microsoft is spending big to keep up with that demand but that’s raising eyebrows among investors in AI infrastructure companies. CoreWeave, a provider of chips and datacenters, saw its stock sink 6% after it reported Q3 earnings, even though it beat expectations on revenues.
That was in part because some traders have questions about whether CoreWeave’s model is sustainable. For instance, 71% of its revenues come from Microsoft. If the Redmond, Wash., company moderates its AI capex, it might spell trouble for CoreWeave.
“I’m not going to speak for other people’s business,” Smith said. “I do think there’s [a role for] diversification for these neocloud providers. I think CoreWeave really blazed the trail for neocloud providers. You see a company like NScale and our partnership with them. You see Nebius, you see G42. I think there’s a role for these different companies.”
Among the reasons Smith thinks AI has so much potential:
At Web Summit, he met Anton Osika, the CEO of Lovable, a vibe-coding startup that lets anyone create apps and software simply by talking to an AI model. “What they’re doing to change the prototyping of software is breathtaking. As much as anything, what these kinds of AI initiatives are doing is opening up technology opportunities for many more people to do more things than they can do before.”
Later, on center stage in front of about 20,000 people in Lisbon’s MEO arena, he highlighted that AI has been adopted faster than almost any other previous technology.
“This will be one of the defining factors of the quarter century ahead,” he said.
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