According to a report by TD Cowen, Microsoft (MSFT, Financial) has abandoned plans for data centers consuming 2GW over the past six months due to an oversupply compared to expected demand. Analysts highlighted that Microsoft recently delayed or canceled data center leasing plans in the US and Europe. The adjustments relate to Microsoft's decision not to support additional workloads from ChatGPT creator OpenAI.
As investments in artificial intelligence (AI) continue to rise, there is growing skepticism about the high capital expenditure by US tech companies in the AI space. Analysts noted that returns from AI investments are growing slower, and costs of AI technology by Chinese startup DeepSeek are significantly lower than those of Western competitors, further heightening investor concerns.
TD Cowen's supply chain check revealed that Microsoft's scaling-back strategy has allowed Google (GOOGL) and Meta (META) to occupy the data center space initially reserved by Microsoft. Google has filled gaps in international markets, while Meta has taken similar steps in the US market. Although Microsoft plans to invest over $80 billion in AI and cloud computing in the current fiscal year, the company has yet to respond to inquiries from Reuters.
Furthermore, TD Cowen analysts pointed out that Microsoft canceled leasing contracts with at least two private data center operators in February, involving several hundred megawatts of capacity.
