Microsoft Reduces Data Center Footprint, Citing Oversupply and AI Spending Concerns
Microsoft is pulling back from planned data center projects in the U.S. and Europe, reportedly due to an oversupply compared to its current demand projections, according to analysts at TD Cowen.
The tech giant’s decision to reduce its leasing of new data center capacity, as indicated by TD Cowen analysts led by Michael Elias, appears to be largely influenced by a reassessment of the need for additional training workloads related to OpenAI, the company behind ChatGPT.
Investor concerns regarding the extensive spending on artificial intelligence by U.S. tech companies have intensified. This is partly due to slower-than-expected returns on these investments and the emergence of competitors like the Chinese startup DeepSeek.
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” a Microsoft representative stated. The company also reaffirmed its plans to invest $80 billion in AI infrastructure during this fiscal year.
TD Cowen’s supply chain research suggests that Microsoft’s reduction in capacity has created an opportunity for Alphabet’s Google to fill the gap in international markets, while Meta Platforms is taking similar action in the U.S.
In February, the TD Cowen analysts indicated that Microsoft had withdrawn from leases, totaling “a couple of hundred megawatts” of capacity, with at least two private data center operators.
Earlier this month, AI cloud startup CoreWeave, which provides data center access, reported that it had not experienced any contract cancellations after the Financial Times reported that Microsoft, its largest customer, had made some adjustments to its agreements.
Executives from Microsoft and Meta defended their substantial AI spending following the DeepSeek reveal in January, emphasizing its importance for maintaining competitiveness in this rapidly evolving field. Alphabet has announced plans to spend $75 billion on AI infrastructure this year, exceeding Wall Street’s expectations by 29%, while Meta has committed up to $65 billion.
