Microsoft is scaling back its data center projects in the United States and Europe, analysts at TD Cowen reported on Wednesday. The tech giant has abandoned projects representing 2 gigawatts of electricity in the last six months, citing an oversupply relative to its current demand forecasts.
The analysts, led by Michael Elias, noted that Microsoft’s pullback includes deferrals and cancellations of existing data center leases across both regions within the past month. According to the note, the decision to reduce its capacity leasing was largely influenced by Microsoft’s choice to limit its support for additional training workloads from OpenAI, the company behind ChatGPT.
Investor concerns regarding the substantial artificial intelligence spending by U.S. tech firms have mounted, partly due to slower-than-anticipated returns on investment and the emergence of Chinese startup DeepSeek. DeepSeek showcased AI technology at a significantly lower cost compared to its Western counterparts, contributing to investor skepticism.
Supply chain checks conducted by TD Cowen indicate that Alphabet’s Google is stepping in to fill the capacity void in international markets, while Meta Platforms is doing the same in the U.S. in response to Microsoft’s reduced commitments.
Microsoft, which anticipates investing over $80 billion in AI and cloud capacity during the current fiscal year, did not immediately respond to a request for comment from Reuters. In February, TD Cowen analysts stated that Microsoft had already scrapped leases totaling “a couple of hundred megawatts” of capacity with at least two private data center operators.
(Reporting by Juby Babu in Mexico City; Editing by Shreya Biswas)
