Microsoft shares rose by about 1–2%, more than recouping a recent 3% drop. Investors digested the jaw-dropping numbers in Anthropic's new IPO filing and drew an obvious conclusion: demand for compute capacity is not just growing — it is devouring supply.
The storm began with Anthropic's updated S-1 filed with the SEC on November 2. The numbers in the filing are eye-watering: Anthropic's total commitments to purchase and lease infrastructure are estimated at roughly $895.4 billion, and the lion's share of that will go to compute capacity.
In this massive chip arms race, tech giants have already reserved front-row positions. Microsoft's committed share is at least $44.9 billion through June 2033 (by comparison, Reuters estimated that contract at $31.4 billion in September).
Google has reserved about $121.3 billion of capacity, and Amazon roughly $110 billion. Still, against Microsoft's total remaining commercial contract exposure of about $677 billion, the Anthropic deal looks like one piece of a much larger strategy.
The S-1 also contains a cautionary line: Anthropic warns that some capacity providers rely on third-party financing. If capital dries up or lending costs spike, deliveries could be delayed, become more expensive, or fail to materialize.
Despite the caveats, the market greeted the filing with euphoria. Other cloud-AI players rallied: Oracle jumped after a successful $20 billion equity placement. Investors breathed easier, seeing financing as resolved. CoreWeave posted even bigger gains.
Microsoft itself is showing why it sits at the center of this arms race. In Q1 of the fiscal year (ending September 30), the giant reported revenue of $92.3 billion (+19%) and net income of $36.6 billion.
The cloud division is the engine: Microsoft Cloud revenue hit $63.9 billion (+30%), and Azure grew 48% year-on-year. CEO Satya Nadella said the company brought 24 new data centers online across five continents in the quarter to meet explosive demand.
Of course, world-class infrastructure comes at a world-class price. Microsoft's capex for the quarter reached $45.2 billion (partly because equipment from third-party vendors was delayed).
As a result, free cash flow fell by 27% to $18.63 billion. Morningstar's blunt headline captured the concern many analysts share: "Azure accelerates, but investment returns remain the test."
Microsoft is not planning to slow down. CFO Amy Hood warned that Q2 capex will top $50 billion and that full-year capex could reach about $170 billion. Yet management still guided Q2 revenue optimistically to a range of $96–97.1 billion.
And while analysts debate margins, Hood emphasized the key point that best explains the race: "Customer demand continues to outstrip available capacity."