Microsoft inks $9.7 billion deal to secure computing power for its AI

Microsoft has signed a $9.7 billion deal with the data-center operator IREN for NVIDIA chips. For this huge figure, Microsoft is granted access to NVIDIA’s advanced chips to help alleviate its computing capacity crunch that has prevented it from fully benefiting from the AI boom. Cash from Microsoft’s prepayment will help IREN to finance part of its related equipment purchases.

Dell is also involved in this deal; it will supply IREN with NVIDIA’s GB300 chips and other equipment for Microsoft’s use, totaling $5.8 billion. According to Reuters, on the back of this news, Dell shares rose 5%, while IREN shares shot up more than 20% in premarket trading, giving it a current market value of $16.52 billion.

For Microsoft, this development expands its computing capacity without requiring Microsoft to build new data centers or secure additional power. While $9.7 billion is a lot of money, this move helps avoid even heavier capital spending on chips that quickly lose value as newer processors are launched.

IREN’s facilities in North America have a capacity of 2,910 megawatts and are powered entirely by renewable energy. NVIDIA’s processors are currently expected to be deployed next year at IREN’s 750-megawatt Childress, Texas, campus. The deployment will also include new liquid-cooled data centers designed to deliver 200 megawatts of critical IT capacity.

The demand for artificial intelligence has led to an increase in demand for computing power, creating a shortage. Microsoft CFO Amy Hood said that Microsoft’s AI capacity crunch could last until the middle of next year. Hopefully, this deal with IREN will help it meet demand for its range of Copilot offerings.

If IREN fails to meet the specified delivery timelines, Microsoft has the right to terminate the contract and go seeking out another company that may be able to deliver the resources it needs.

Source: Reuters | Image via Depositphotos.com