Limits of Virtual Worlds

I read an interesting piece that unpacks the FY26 Q1 results from Microsoft and points to the massive losses by OpenAI.¹ MSFT owns the largest share at 27% and so it holds 4.1B$ of the losses. I am intrigued by two points, the massive losses at OpenAI, and the backlog on cloud compute capacity at Microsoft. On the one hand, the OpenAI losses could simply be cost of research, but it does speak to the scale of the problem and makes one wonder about the staying power of human imagination. How long can the economic promise or hope of a return on these AI capabilities sustain such massive losses? Will we hold out for the promise of Artificial General Intelligence (AGI) by 2030? Or will we return to another AI winter?²

The backlog on Azure building is an interesting problem. As much as we enjoy living in a world of imagination and digital possibilities, there is a physical layer that simply does not disappear when the general emphasis is on the virtual. I enjoy many tools and capabilities that are created in virtual spaces that only really exist in the minds of the people participating. Making these real in my space, such as a video game, or the ability to share calendars with my husband, all require physical infrastructure. Servers live in buildings and require electricity generated by various means. It takes time and materials to build these, and the allocation of these societal resources is managed with that famously virtual concept: money.

This connection between the imagined and the physical ties into my thinking about the worlds we create in movies and video games. Particularly I think about the Star Wars series where there is a casual presumption that the manufacturing capacity of the Empire, and the general society inclusive of the rebellion, is of an almost infinite capacity. The amount of material that is required to build the cities, the massive space stations, and space ships is staggering. Of course, any storyteller must blur past some issues as a story must keep pace with the expectations of the audience. I think, however, an interesting point where we see reality, in the form of Azure capacity backlog, running afoul of the physical reality of limited supplies and labour.

The virtual world is imaginary.

Footnotes

• 1: App Economy Insights. 2025-10-31. “Microsoft + OpenAI’s Wild Ride.” How They Make Money. Accessed 2025-11-01 at https://www.appeconomyinsights.com/p/microsoft-openais-wild-ride. return to above
• 2: Wikipedia contributors. 2025-09-06. “AI winter.” Wikipedia, The Free Encyclopedia. Accessed 2025-11-01 at https://en.wikipedia.org/w/index.php?title=AI_winter&oldid=1309819497. return to above

Postscript: In deciding to throw together this quick post, I also find myself in a strangely parallel construct. I went to my blog and an update or some other strange conflict has resulted in the loss of my visual editor on WordPress. I spent a couple hours trying to bring it back including reinstalling the core, turning off all the plugins, changing the theme, and rolling the core back to prior versions of WordPress. Nothing worked. So physical realities, in this case the internal complexities of these tools we use, has come to effect my ability to share the thoughts that live in my head. Virtual reality has been checked by external, physical reality.

Post Postscript: Also, I have been hunkered down for a couple months in between visits from various friends and family. Perhaps more updates now. We shall see. Regardless, I hope you all have a wonderful day!