Microsoft Readies $10 Billion AI Investment Plan in Japan

Microsoft Corp. announced a four-year, $10 billion investment package in Japan, part of the US company’s Asia-wide push to expand in a region hungry for artificial intelligence services.

The world’s largest software maker said it will develop cloud and AI infrastructure alongside Sakura Internet Inc. and telecom operator SoftBank Corp., with the two Japanese entities supplying graphics processing units and other computing resources. Sakura Internet’s stock jumped 20% on the news Friday, its biggest intraday gain since September. Shares of SoftBank, the telecom arm of investment group SoftBank Group Corp., rose 0.5%.

As part of the package, Microsoft, whose Copilot has struggled to keep pace with OpenAI’s ChatGPT and Google’s Gemini, will invest in cybersecurity partnerships and train a million AI engineers through 2029. The plan will keep data processing within Japan’s borders, Microsoft said in a release that coincided with its President Brad Smith’s meeting with Japanese Prime Minister Sanae Takaichi.

The Redmond, Washington-based company is battling Amazon.com Inc. and Alphabet Inc. for dominance in Japan, which is spending billions to develop a robust AI ecosystem and catch up to the US and China. Microsoft’s commitment in Japan follows similar announcements earlier this week in Singapore and Thailand, as well as a pledge in 2024 to spend about $2.9 billion in Japan over two years.

But US hyperscalers’ planned outlays of about $650 billion this year alone to build out power-guzzling data centers are coming up against global power constraints, as the war in the Middle East enters its second month. Resource-poor Japan relies on the Middle East for more then 90% of its oil and is already turning to less-efficient coal-fired power plants to make sure it can meet existing energy needs.

Still, Japan’s government is earmarking about ¥1.23 trillion ($7.7 billion) to support cutting-edge chips and AI development this fiscal year. It seeks to use the country’s leadership in industrial robotics to win a more than 30% global market share in so-called physical AI by 2040.

Microsoft has shifted more focus to selling Copilot, its AI tool for the workplace, instead of offering it for free as part of a software bundle. It’s combining the separate Copilot teams for consumer and corporate clients in a bid to create a smoother AI service across its offerings.