Microsoft being GPU constrained is potential risk, UBS says
Jean-Luc Ichard
Investment firm UBS said on Tuesday that the risk for software companies such as Microsoft (NASDAQ:MSFT) of being GPU constrained is a "reality" and could impact their abilities to generate AI revenue streams next year. 
"Microsoft and others are facing a constrained supply of Nvidia (NVDA) GPUs, and while we and others have written plenty about the AI upside opportunity, we also need to assess the risk that Microsoft canât get sufficient access to GPUs to deliver on its projected Copilot revenue ramp and the AI ambitions of its customer base," analyst Karl Keirstead wrote in an investor note. 
Keirstead, who has a buy rating and a $400 price target on Microsoft (MSFT), also cited Amazon (AMZN) and Adobe (ADBE) as potentially being impacted by the GPU constraint.
Redmond, Washington-based Microsoft (MSFT) said in July that it plans to spend around $50B in fiscal 2024, which Keirstead said "speaks to a material AI capacity build-out." However, it looks as if the supply shortage is already having an impact, with Keirstead citing Super Micro Computer's (SMCI) recent earnings report as an example.
"While Nvidiaâs print last week offered incremental comfort that it is addressing its supply chain constraints, this remains a risk to Microsoft that investors need to thoroughly assess and measure. GPU capacity constraints are a reality, not a hypothetical and low-probability 'black swan' event," Keirstead added.
Microsoft (MSFT) shares were fractionally lower in pre-market trading on Tuesday.

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