Satya Nadella: belief

Transcript context

…Another question that comes around this whole fungibility topic. Okay, it’s not where you want it, you would rather have it in a good population center, like Atlanta. We’re here. There’s also the question of, how much does that matter as the horizon of AI tasks grows? 30 seconds for a reasoning prompt, or 30 minutes for a deep research, or it’s going to be hours for software agents at some point and days and so on and so forth, the time to human interaction. Why does it matter if it’s location A, B, or C? It’s a great question. That’s exactly it. In fact, that’s one of the other reasons why we want to think about what an Azure region looks like and what is the networking between Azure regions. This is where I think as the model capabilities evolve and the usage of these tokens evolves, whether it’s synchronously or asynchronously, you don’t want to be out of position. Then on top of that, by the way, what are the data residency laws? There’s the entire EU thing, where we literally had to create an EU Data Boundary. That basically meant that you can’t just roundtrip a call to wherever, even if it’s asynchronous. Therefore you need to have maybe regional things that are high density, and then the power costs and so on. But you’re 100% right in bringing up that the topology as we build out will have to evolve. One, for tokens per dollar per watt. What are the economics? Overlay that with, what is the usage pattern? Usage pattern in terms of synchronous, asynchronous. But also what is the compute storage? Because the latencies may matter for certain things. The storage better be there. If I have a Cosmos DB close to this for session data or even for an autonomous thing, then that also has to be somewhere close to it, and so on. All of those considerations are what will shape the hyperscale business. Prior to the pause, what we had forecasted for you, by 2028 you were going to be 12–13 gigawatts. Now we’re at nine and a half or so. But something that’s even more relevant—and I just want you to more concretely state that this is the business you don’t want to be in—is that Oracle’s going from 1/5th your size to bigger than you by the end of 2027. While it’s not a Microsoft-level quality of return on invested capital, they’re still making 35% gross margins. So the question is, maybe it’s not Microsoft’s business to do this, but you’ve created a hyperscaler now by refusing this business, by giving away the right of first refusal, et cetera.…

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