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Microsoft has cancelled data centre leases in the US with at least two operators and scaled back plans for international spending, TD Cowen analysts said, as companies face questions over their heavy spending on AI infrastructure.
The cancelled data centre leases amount to “a couple of hundreds of megawatts”, said a note from analysts led by Michael Elias, citing routine supply chain checks.
Microsoft also appears to have re-allocated a “considerable portion” of its planned international spending back to the US, indicating a potential scaling back of the company’s international expansion plans.
AI spending
The supply chain check found Microsoft had also scaled back converting signed statements of qualifications into data centre leases, but could not determine whether this amounted to a delay or a termination.
A statement of qualification is a precursor to a data centre lease.
The Azure cloud operator cancelled several data centre deals over 100 megawatts, allowed more than 1 gigawatts of deals to expire and cancelled at least five deals for land parcels that had been planned for data centre expansion.
The analysts said they were not able to determine why Microsoft was making the moves, but speculated it was responding to concerns that have affected the broader sector over potential overspending on AI infrastructure.
Investors have been re-evaluating the AI sector since the rapid rise to worldwide popularity last month of Chinese start-up DeepSeek, which developed open source AI models that are said to perform on par with Western competitors but were trained at a fraction of the cost.
DeepSeek’s emergence has raised questions over the potential financial returns from the billions companies such as Microsoft, Meta Platforms and others are spending on data centres to power AI offerings.
Microsoft’s shift may also be related to an apparent shift by OpenAI toward relying more on Japan’s SoftBank as a financial backer.
Microsoft is currently OpenAI’s biggest backer, but OpenAI and SoftBank recently announced the Stargate project to spend up to $500 billion (£395bn) on AI infrastructure in the US.
Cloud growth
Microsoft, Oracle and others are also involved with Stargate.
Analysts at Bernstein said Microsoft’s moves could “foretell a sustained slowing” in growth at Microsoft’s Azure cloud computing unit.
Microsoft previously said it expected its cloud business to grow by 31 to 32 percent in the fiscal third quarter, disappointing analysts.
Bernstein analyst Mark Moelder said Microsoft’s shift on data centre leases could reflect the build-up in capacity at the company’s own data centres, meaning it no longer required leases on other data centre capacity.
The Windows maker said its plan to invest more than $80bn in AI and cloud capacity this fiscal year remained on track.
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” a company spokesperson said.
