Microsoft is “slowing or pausing” some of its artificial intelligence data center projects, according to Noelle Walsh, the company’s president of cloud operations and innovation. In a recent LinkedIn post, Walsh confirmed earlier reports of the pullback, citing “heighted interest in the adjustments we are making to some early-stage datacenter infrastructure projects.”
The development comes as Microsoft and other big tech companies face growing investor scrutiny over their heavy AI spending. The company remains on track to spend roughly $80 billion during the current fiscal year on AI-enabled data centers, a spokesperson told CFO Dive.
Walsh explained that the demand for Microsoft’s cloud and AI services grew more than anticipated, prompting the company to execute “the largest and most ambitious infrastructure scaling project in our history.” She noted that such significant new endeavors require agility and refinement as the company learns and grows with its customers.
The pullback also coincides with President Donald Trump’s on-again, off-again tariff measures, creating added pressure and uncertainty for tech executives. Wedbush analysts have called the current tariff situation an “economic Twilight Zone” that has created “real damage to the corporate spending mentality.”
The administration imposed new levies on imported goods on April 2, then partially rolled them back. On April 9, Trump announced a 90-day pause on some tariffs while imposing 125% tariffs on China, triggering a full-scale trade war. China retaliated by hiking its tariffs on U.S. goods to 125%.
Tariffs could potentially hurt the tech sector by causing enterprise customers to tighten IT spending and raising raw material costs, such as steel needed for data centers, according to Hank Galligan, BDO’s national technology industry leader. “Clearly, the cost will have an impact on the amount of capacity that will be able to be built,” he said.
Analysts estimate that 10%-15% of cloud and AI initiatives in the U.S. could be slowed during this period of uncertainty, with Microsoft being “front and center” in this economic period.
