Key Points
Microsoft unveiled Maia 300, the third generation of its in-house AI chip, and said it will become "the primary AI inference system" for its products and services starting in 2027.
Microsoft claims 40% more AI output per megawatt than leading GPU-based systems, the market Nvidia dominates.
Microsoft rose 1.1% to $541.15. Nvidia fell 1.3% to $226.32**, one week after hitting a record high.
Memory chip stocks also sold off after China's largest DRAM maker said it will launch a denser server memory product by year-end. Micron dropped 3.9%, and SanDisk fell 6%.
For three years, Microsoft has been one of Nvidia's biggest customers.
On Monday, it told the world it plans to need Nvidia a lot less.
"Today we are announcing our biggest bet yet on our own silicon," CEO Satya Nadella posted on X. "Starting next calendar year, we will scale our Maia family to multi-gigawatt deployments, making it the primary inference system for our own product and services."
Inference is the work of actually running AI models, like answering Copilot questions. It's the fastest-growing part of AI computing, and Microsoft just said most of it will run on its own chips.
What Microsoft Built
"We expect Maia 300 to deliver 40 percent more tokens per megawatt compared to leading GPU-based systems," said Scott Guthrie, who runs Microsoft's cloud group. "And in a full 96-accelerator configuration, it delivers up to 7x the rack-scale token throughput of Maia 200."
Each chip carries eight stacks of next-generation HBM4 memory inside a 950-watt power budget, built on TSMC's 2-nanometer-class process.
That power number matters most. Grid connections are scarce, and once a data center is built, its power supply is fixed. A chip that squeezes 40% more output from every megawatt is effectively a 40% bigger data center.
How the Market Reacted
Investors picked a side. Microsoft gained $6.08, or 1.1%, to close at $541.15. Nvidia fell $2.96, or 1.3%, to $226.32. The selling spread across the AI chip complex: AMD lost 2.3%, Broadcom 1.9%, Marvell 3.4% and Taiwan Semiconductor 2%.
Nvidia has been on a run. The stock hit its first record close since May on Oct. 2, and its market value reached about $5.7 trillion, the largest of any company. Even so, it's up only about 28% this year, while the broader chip sector has nearly doubled.
Now one of its largest customers is publicly planning a future built around its own hardware. Microsoft joins Google, Amazon and Meta, which all design custom AI chips.
Why Nvidia Isn't Finished
Maia 300 won't be deployed at scale until 2027. Its predecessor, Maia 200, was announced in January after delays, and as of this summer it was running in just two U.S. data centers, according to The Information. Unlike Google's and Amazon's chips, Maia isn't available for outside customers to rent.
Microsoft and Nvidia also remain close partners. Nadella and Nvidia CEO Jensen Huang shared a stage just last week, and Microsoft plans to be among the first to deploy Nvidia's next-generation Vera Rubin systems.
"I don't expect Maia to slow Nvidia or AMD deployments across Azure," wrote Matt Kimball of Moor Insights & Strategy. "AI demand is growing too fast for any single supply chain."
The bigger risk for Nvidia is pricing power, not volume. Every hyperscaler with a credible in-house chip has leverage when it negotiates its next Nvidia order. And as we noted when OpenAI came up short of revenue expectations, investors are now asking harder questions about who pays for all this hardware.
Memory Stocks Get a China Scare
Microsoft wasn't the only chip headline. China's ChangXin Memory Technologies (CXMT) said it will launch a DDR5 server memory module by the end of 2026 using a denser cell design that can cut cell area by about 33%.
That was enough to shake a group that has run hard this year. Micron fell 3.9% to $989.04, SanDisk dropped 6% to $1,487.33, Seagate lost 3.8% and Western Digital slid 2.6%.
Optical networking stocks took the hardest hit as traders locked in profits after Friday's rally. Lumentum plunged 9.8% to $995.41, falling back below $1,000, and Ciena dropped 10% to $405.01.
The Rest of Monday
The broader market split along the same lines. The Dow rose 196 points, or 0.4%, to 51,850.55 as money rotated into energy and bank stocks ahead of Tuesday's earnings. The S&P 500 slipped less than 0.1% to 7,807.24, and the tech-heavy Nasdaq fell 0.4% to 27,245.90. The VIX, Wall Street's fear gauge, rose to 15.21.
Among individual movers, Meta jumped 3.4% on speculation about a new AI model. CCC Intelligent Solutions surged 8.1% on reports that GTCR and Elliott are in advanced talks to buy the company. eBay rose 2.2% after Morgan Stanley named it a top pick and Salesforce gained 2.1% after Bank of America upgraded it to buy. IonQ sank 9.1% after agreeing to buy cybersecurity firm Elisity for up to $1.3 billion in stock.
Oil swung higher. Prices reversed early losses after Houthi strikes on Riyadh's airport and attacks on two tankers near the Strait of Hormuz. U.S. crude rose about 1.5% to near $93 a barrel, and Brent climbed to about $106.
The bond market was closed for Columbus Day, so Treasury trading resumes Tuesday.
What Lands Next
It's shaping up as the loudest week of the fall.
Tuesday: JPMorgan, Goldman Sachs, Wells Fargo and Citigroup kick off bank earnings season before the bell. UnitedHealth and Johnson & Johnson also report.
Wednesday: September CPI at 8:30 a.m. ET, with the Cleveland Fed's nowcast pointing to 3.6% headline inflation. Bank of America, Morgan Stanley and ASML report.
Thursday: Taiwan Semiconductor, which makes chips for both Nvidia and Microsoft, reports after guiding to $44.6 billion to $45.8 billion in revenue. September retail sales and producer prices are also due.
Microsoft just told Wall Street where the AI money goes next: into chips that do more work with less power. Nvidia still sells the most important hardware in the world. The question is how long its biggest customers keep paying its prices.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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