Microsoft Corp. has reportedly canceled leases for a significant amount of data center capacity in the US, raising questions about the long-term demand for artificial intelligence (AI) infrastructure.
According to a research note from TD Cowen, the company has voided leases totaling “a couple of hundred megawatts” and has stopped converting agreements that typically lead to formal leases.
Despite committing $80 billion to expand its AI computing capabilities this fiscal year, Microsoft appears to be reevaluating its data center expansion plans. The tech giant has also redirected a significant portion of its international investments back to the US, signaling a slowdown in overseas leasing activity.
While Microsoft has reaffirmed its spending target, a company spokesperson acknowledged that it might “strategically pace or adjust” infrastructure investments in certain areas. However, the company insists it is still growing at a record pace to meet AI demand.
This development comes amid growing Wall Street skepticism about AI’s long-term commercial viability. Some analysts have raised concerns that major tech firms—including Microsoft, Meta, and Amazon—may be overestimating future AI demand and spending heavily on infrastructure that may not be fully utilized.
Microsoft’s evolving relationship with OpenAI, its largest AI partner, could also be influencing its data center strategy. In January, OpenAI and SoftBank Group announced plans to invest at least $100 billion—and potentially up to $500 billion—in AI infrastructure, which may reduce Microsoft’s need for additional facilities.
The news had an immediate impact on European energy and infrastructure stocks, as companies supplying power to data centers saw declines. Schneider Electric SE dropped 7.2%, while Siemens Energy AG fell by more than 10%.
Additionally, investors are closely watching AI chipmaker Nvidia, which is set to report earnings soon. Its results may provide further insight into whether AI demand will continue to justify the massive infrastructure investments being made by Microsoft and other tech giants.
TD Cowen analysts suggest that Microsoft may be adjusting its forecasts after being the most aggressive data center lessee in 2023 and early 2024. The firm’s decision to pause construction on a Wisconsin data center—previously planned to support OpenAI—indicates a potential shift in strategy.
With input from Bloomberg and Market Watch.
