Microsoft’s AI Economics Face Scrutiny as Cloud Growth Diverges From Early Hype
Rothschild & Co Redburn analyst Alex Haissl delivers a sobering assessment of Microsoft’s Gen-AI prospects, arguing the technology’s capital intensity undermines bullish comparisons to cloud 1.0’s golden era. GPU deployments require six times more investment for equivalent returns—a structural hurdle that could pressure Azure’s margins despite its current dominance.
While Microsoft remains the market’s preferred AI proxy, Haissl flags Office 365’s vulnerability to Gen-AI disruption as an underappreciated risk. The analyst’s warning coincides with peak optimism about AI monetization, suggesting investors ‘get real’ about scaling challenges.
Key divergence: Unlike cloud 1.0’s predictable returns, Gen-AI’s ‘downside-skewed’ economics may force Azure to choose between growth and profitability. This tension could reshape Microsoft’s valuation narrative in 2024.
