Microsoft Shares Slide On Report Of Lower Demand For AI Software

Microsoft Corp. shares slid after the Information reported that the software maker has lowered expectations for getting business customers to spend money on new artificial intelligence products.

The stock was down as much as 2.9%, the most since Nov. 18, as trading got underway in New York Wednesday.

Several divisions at Microsoft have lowered quotas for how much salespeople are supposed to increase sales of certain AI products after many of them missed their targets in the fiscal year that ended in June, the Information reported, citing two salespeople in the Azure cloud division.

The unusual shift reflects how Microsoft is compensating for companies’ resistance to pay more for AI, according to the report.

Microsoft and its Big Tech rivals, including Alphabet Inc.’s Google, Meta Platforms Inc. and Amazon.com Inc., have been spending massively on chips, servers and other expenses related to building data centers to fuel the demand for AI computing.

But there are signs that the market is growing skeptical that the costs are justified by an as-yet unproven technology.

Some businesses have complained that it’s hard to measure savings made from using AI for routine tasks and note that the technology still makes mistakes that can be costly, the Information said.

One Microsoft Azure sales unit had set quotas for salespeople to increase customers’ spending on a product called Foundry by 50% in the last fiscal year, the Information said.

But fewer than one-fifth of salespeople in that unit met their targets and in July Microsoft lowered the goal to about 25% growth for the current fiscal year compared with the last, the Information reported.