Tech giant Microsoft (MSFT) is changing its approach to developing in-house AI chips, according to The Information. After facing delays, the company has decided to focus on simpler, less ambitious chip designs through 2028. The goal is to make these chips easier to develop while still remaining competitive with Nvidia’s (NVDA) powerful AI chips. Microsoft shared this updated plan with its internal chip engineering team after realizing that trying to build a brand-new chip from scratch every year was not realistic.
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To keep up with Nvidia without rushing risky designs, Microsoft is planning to launch an intermediate chip in 2027 called Maia 280. This chip will combine two of the earlier Braga chips to deliver more power, which could potentially offer 20-30% better performance per watt than Nvidia’s expected chips that year. Microsoft also renamed its next major chip, Braga-R, to Maia 400. This chip is scheduled for mass production in 2028 and will use faster memory and a new die-to-die chip connection, which links parts of the chip before full assembly.
However, this method increases the risk of manufacturing defects. As a result, Microsoft is also adopting a chiplet design approach that breaks chips into smaller parts that are manufactured separately and then combined. This method reduces defects and saves money, but may slightly reduce performance. While some chip projects have been delayed, others are on track. Indeed, Microsoft successfully launched its Cobalt CPU in 2024 to reduce its reliance on Intel (INTC) and AMD (AMD). Interestingly, Cobalt powers Microsoft services, such as Teams, and is available to Azure customers. In addition, its next version, called Kingsgate, is already designed and will use chiplets and faster memory.
Is MSFT Stock a Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 30 Buys and four Holds assigned in the last three months. Furthermore, the average MSFT price target of $524.86 per share implies 5.1% upside potential.
