Microsoft Trims Anthropic Budget by 90% While Betting on On-Device AI

Microsoft slashed Anthropic spending caps for cloud and AI staff and is shifting AI workloads to devices as analysts stay bullish.

Microsoft has quietly tightened the purse strings on third-party AI models, slashing the monthly spending cap for Anthropic's technology from $100,000 to roughly $10,000 for staff in its cloud and AI divisions. The company also cut its internal annual forecast for these external tools dramatically, directing employees toward its own software assistants instead. Management's aim is to rein in operating costs tied to outside compute capacity, even as enterprise customers continue to access Microsoft's cloud offerings.

The belt-tightening lands amid a broader debate over the scale of Big Tech's infrastructure spending. Investor Michael Burry took aim at Microsoft's ballooning capital outlays, accusing the company of wielding financial metrics as leverage to advance its own capital-market interests. In his view, analysts barely scrutinize the figures presented. Burry also cautioned that a substantial share of the billions poured into data centers and semiconductors could turn into stranded costs as technology shifts. His calculations point to significant misjudgments looming for leading cloud providers on necessary write-downs, with infrastructure financing particularly exposed as rising debt collides with climbing interest rates. As global investment by the largest technology firms keeps swelling, skeptics grow louder about future overcapacity.

Wall Street Stays Bullish

Financial analysts, by contrast, remain decidedly upbeat. Many industry watchers frame the heavy upfront spending as an unavoidable prerequisite for meeting surging demand for compute. RBC analyst Rishi Jaluria reaffirmed his buy rating on Microsoft today with a $640 price target. Melius Research also upgraded the stock to "Buy" with a $665 target, as analyst Ben Reitzes pointed to strong momentum in the cloud business.

To ease the load on its own data centers over the medium term, Microsoft is pushing more AI workloads directly onto end devices. A day earlier, the company unveiled new hardware models and specialized developer tools built for that purpose. The architecture lets developers run complex workflows locally, sidestepping expensive cloud inference.

Hybrid Intelligence Anchors Windows

The effort reflects a two-track technology strategy to ready the Windows platform for artificial intelligence. Microsoft introduced what it calls hybrid intelligence, which splits computing tasks flexibly between devices and cloud data centers. The push underscores the company's ambition to embed compute-driven assistance deep in the operating system without forcing users into permanent cloud connections. Local processing is meant to shorten response times and safeguard sensitive corporate data, while demanding models continue to run in external data centers.

At the center of Wednesday's announcements are new Windows interfaces that link local compute with cloud systems. Planned features include expanded action commands within Windows search and specific security functions for autonomous software agents. Microsoft also reported general availability of Microsoft Execution Containers, which provide standardized execution environments.

Complementing the software offensive is tailored hardware. Since yesterday, the company has been taking preorders for the Surface Laptop Ultra, priced from $2,599 and equipped with Nvidia's RTX Spark chip. Shipping for these machines, along with devices from partner manufacturers, is set to begin on October 16.

Earnings Date Set, Leadership Shift Underway

Beyond its technical projects, Microsoft fixed the schedule for its upcoming results yesterday. The company will report first-quarter figures for fiscal 2027 on October 28, 2026, after the U.S. market close. The accompanying investor call is slated for 2:30 p.m. Pacific time.

At the same time, a leadership transition is taking shape. As Microsoft announced on October 1, Ryan Roslansky will leave the company after nearly 18 years. He will remain as an advisor through the end of the year while Microsoft reorganizes internal reporting lines for Microsoft 365 and LinkedIn.

Investors have so far shrugged off the warnings about heavy spending. Microsoft shares changed hands at EUR 473.90 in European trading, leaving the stock just 0.9% below its 52-week high of EUR 478.10.