Microsoft Faces Hurdles in AI Chip Development Amid Growing Competition
Delays and Design Issues Put Microsoft Behind in Race for Custom AI Hardware
Microsoft (MSFT) has struggled for years to develop its own AI chips, aiming to reduce reliance on leading supplier Nvidia (NVDA).
- The company’s latest project, a chip called Braga, has been delayed from 2025 to 2026 due to design changes, staff shortages, and high employee turnover, as reported by The Information.
- When Braga eventually launches, it is expected to underperform Nvidia’s top Blackwell chip, both in power and energy efficiency.
Microsoft’s first custom chip, Maia 100, debuted in 2023, but it remains limited to internal testing.
- Originally designed in 2019 for image processing rather than AI, Maia 100 was not well-suited for the generative AI surge.
The company’s roadmap included three next-generation chips—Braga, Braga-R, and Clea—planned for release between 2025 and 2027.
- With Braga’s delay, there is rising concern about whether Microsoft can meet its future timelines.
- These chips focus on AI inference, the process by which AI models make real-time decisions.
Complications intensified after OpenAI—a close Microsoft partner—requested additional features, making Braga unstable during testing.
- This resulted in further delays, high stress among staff, and turnover rates reaching as high as 20% on some teams.
- Microsoft also abandoned plans for a chip dedicated to AI model training in early 2024.
Competitors Gain Ground with In-House AI Chips
Meanwhile, Amazon (AMZN) is preparing to launch its third-generation Trainium 3 chip by year-end, claiming it will be twice as powerful as its predecessor.
- Google (GOOGL), a leader in custom AI hardware, has relied on its TPU chips for years and plans to ramp up production of its new Ironwood chip in 2026, despite minor setbacks from MediaTek staff moving to Nvidia.
Analyst Sentiment: Is Microsoft Stock a Buy?
Despite these challenges, analysts remain bullish on MSFT, maintaining a Strong Buy consensus rating.
- The average price target is $521.41 per share, implying 4.6% upside potential from current levels.
