Microsoft (MSFT, Financials) backed away from U.S. and European data center projects totaling 2 gigawatts over the past six months, TD Cowen analysts said, attributing the move to excess infrastructure relative to current AI demand.
The brokerage's report claims part of the layoff results from Microsoft not requiring more capacity to assist OpenAI training loads. Microsoft said it will keep on "strategically pace or adjust" infrastructure expansion but still intended to spend $80 billion on artificial intelligence infrastructure for the present fiscal year.
News of the company's shares fell more than 1%, indicating investor anxiety over the speed of AI expenditure in light of worries about delayed returns and rising competition.
Rival technology companies seem to be taking up the abandoned capacity. While Meta Platforms (META, Financials) is doing so within the United States, TD Cowen's supply chain checks indicated Alphabet (GOOGL, Financials) is expanding its data center network globally.
The company had already said in February that Microsoft terminated agreements with at least two private data center operators totaling several hundred megawatts.
The competition for artificial intelligence infrastructure is very fierce. According to experts, Alphabet is anticipated to spend around 29% more than Wall Street projections—$75 billion—on AI projects this year; Meta Platforms has promised as much as $65 billion.
AI cloud provider CoreWeave said it has not seen any cancellations from Microsoft despite claims it was pulling out of certain agreements.
Especially when companies like China-based DeepSeek launch cheaper generative AI substitutes, market players are becoming more worried about the viability of bold AI capital expenditure plans.
