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Oct 29 (Reuters) - Microsoft said on Wednesday it spent nearly $35 billion on artificial intelligence in its fiscal first quarter, surpassing market expectations and overshadowing blockbuster growth in its cloud-computing business. Shares of the company dipped 3% in extended trading, as the higher-than-expected capital expenditure number spooked investors who are growing increasingly concerned about an AI bubble. Sign up here. Microsoft's capital expenditures in the quarter stood at $34.9 billion, compared with Visible Alpha estimates of $30.34 billion. CLOUD BUSINESS GROWS 40% Total revenue rose 18% to $77.7 billion, beating expectations of $75.33 billion, according to data compiled by LSEG. The results still highlight the growing returns from Microsoft's massive AI investments. They come as a web of circular deals, soaring valuations and limited evidence of AI productivity gains have raised doubts about how long the boom will last. The results follow Microsoft's revised deal with OpenAI this week that gave it a 27% stake worth about $135 billion, as well as a cut of sales and access to intellectual property, clearing up uncertainty about the collaboration with the company synonymous with the AI boom. That AI push has turned Microsoft into the world's second-most valuable firm with a $4 trillion market value, trailing only the $5 trillion chip company Nvidia. The stock, up nearly 30% this year, is among the best performers in the "Magnificent 7." Some analysts have praised Microsoft's decision in recent months to let some OpenAI contracts go to Oracle, saying it shows discipline in steering limited AI capacity toward more profitable enterprise customers. The move is part of a broader strategy to lessen its dependence on OpenAI by building its own models and partnering with other AI firms, including Anthropic. Still, capacity limits have hampered Microsoft's ability to fully cash in on AI. The company and other major cloud providers are expected to spend about $400 billion on data centers and AI chips this year, with executives and analysts saying such spending is necessary to harness the technology's potential. Reporting by Aditya Soni and Deborah Sophia in Bengaluru; Editing by Maju Samuel and Rod Nickel
