Microsoft Corp. has begun canceling leases for a significant amount of data center capacity in the US, raising questions about its AI investment strategy. According to a report by TD Cowen, Microsoft has voided leases totaling "a couple of hundred megawatts" of capacity, based on channel checks with supply chain providers.

The company has also stopped converting "statements of qualifications" preliminary agreements that usually lead to formal leases, a tactic previously used by Meta Platforms Inc. when it cut back on capital spending.

TD Cowen's report further highlighted that Microsoft is redirecting part of its planned international spending back to the US, suggesting a "material slowdown in international leasing." This shift has sparked concerns about whether Microsoft, a leading figure in AI development, is becoming more cautious about future demand.

Despite these cancellations, Microsoft maintains its commitment to AI infrastructure. The company confirmed that it remains on track to spend $80 billion this fiscal year on AI data centers. In a statement on Monday, Microsoft emphasized that while they may "strategically pace or adjust" infrastructure plans, they will "continue to grow strongly in all regions."

The pullback also appears linked to OpenAI’s evolving strategy. TD Cowen analysts noted that OpenAI, backed by Microsoft, is exploring partnerships with other providers, such as Oracle Corp. In January, Microsoft adjusted its multiyear deal with OpenAI, allowing the AI startup to use cloud services from rival companies, though Microsoft still holds the right of first refusal for OpenAI’s AI model training needs.

The report had immediate market effects, causing a drop in European energy stocks, including Schneider Electric SE and Siemens Energy AG, as investors speculated that reduced data center construction could lower power demands.

While Microsoft has downplayed concerns about AI overcapacity, TD Cowen’s channel checks revealed the company has allowed over a gigawatt of larger site agreements to expire and walked away from multiple deals involving around 100 megawatts each.

The AI race continues to push tech giants like Microsoft, Meta, and Amazon to invest heavily in data centers, but growing scrutiny from Wall Street fueled by emerging AI models like DeepSeek's cost-effective alternatives has added pressure to balance aggressive spending with strategic caution.

PHOTO: REUTERS, MICROSOFT

This article was created with AI assistance.