Dec 3 (Reuters) - On Wednesday, Microsoft denied a report from The Information claiming that multiple divisions within the company reduced sales growth targets for certain artificial intelligence products after several sales staff failed to meet their goals in the fiscal year ending June. The report, based on sources, cited two salespeople from Microsoft's Azure cloud-computing unit, a segment closely monitored by investors as it is the primary beneficiary of the company's AI initiatives. A company spokesperson said in a statement, "The Information's story incorrectly conflates growth and sales quotas, reflecting a misunderstanding of how a sales organization operates and is compensated. " They added, "Aggregate sales quotas for AI products have not been lowered, as we informed them prior to publication. " Following Microsoft's denial, shares—which had fallen nearly 3% in early trading—recovered some losses, ending the day down 1. 7%. Reuters was unable to independently verify The Information’s report. CONCERNS ABOUT AI BUBBLE Rising technology valuations and indications of slow adoption of emerging AI technology have sparked fears recently of a growing bubble reminiscent of the 1990s dot-com boom. An MIT study earlier this year found that only about 5% of AI projects progress beyond the pilot stage. The Information’s report noted that Carlyle Group began using Copilot Studio last year to automate tasks such as meeting summaries and financial modeling, but subsequently reduced its spending on the product after raising concerns with Microsoft about difficulties in reliably extracting data from other sources. The report also said that one U. S. -based Azure sales team had set quotas requiring sales staff to increase customer spending on Foundry—a tool for building AI applications—by 50% in the last fiscal year, but fewer than 20% of the team met these targets. It added that Microsoft lowered these targets in July to approximately 25% growth for the current fiscal year compared to the previous period. Microsoft did not respond to inquiries regarding whether Carlyle had decreased its spending on Copilot Studio. Several analysts have pointed out that companies remain in early stages of AI adoption and are likely to face challenges. D. A. Davidson analyst Gil Luria said, "This does not mean there is no promise for AI products to help companies become more productive, only that it may be more difficult than anticipated. " U. S. technology giants face pressure from investors to demonstrate that their significant investments in AI infrastructure are delivering returns. RECORD INVESTMENTS In its fiscal first quarter ending in October, Microsoft reported a record capital expenditure of nearly $35 billion and cautioned that spending would increase this year.

Overall, U. S. tech firms are expected to invest about $400 billion in AI in 2024. These companies assert that such expenditures are essential to overcome supply constraints that have limited their ability to capitalize fully on AI demand. Microsoft forecasts that it will continue to experience AI capacity shortages at least until the end of its current fiscal year in June 2026. Thus far, this spending has benefited the Satya Nadella-led company, with revenue from its Azure cloud unit growing 40% in the July-September quarter, surpassing expectations. Its fiscal second-quarter forecast also exceeded estimates. Moreover, Microsoft's AI initiatives have helped it become the second company this year to reach a $4 trillion valuation after Nvidia, although its market value has declined since then. (Reporting by Aditya Soni, Jaspreet Singh, and Anhata Rooprai in Bengaluru; Editing by Arun Koyyur)