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(Bloomberg) -- Microsoft Corp. has begun canceling leases for a substantial amount of datacenter capacity in the US, a move that may reflect concerns about whether it’s building more AI computing than it will need over the long term, TD Cowen said in a report.
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OpenAI’s biggest backer has voided leases totaling “a couple of hundred megawatts” of capacity, the US brokerage wrote Friday, citing channel checks or inquiries with supply chain providers. Microsoft has also stopped converting so-called statement of qualifications, which are agreements that usually lead to formal leases, TD Cowen said. That was a tactic rivals such as Meta Platforms Inc. employed previously, when it decided to cut back on capital spending, the brokerage wrote.
Microsoft is also redirecting a portion of its planned international spending to the US, TD Cowen said, which “suggests to us a material slowdown in international leasing.”
A pullback by Microsoft on spending and datacenter construction raises questions about whether the company — one of the frontrunners among Big Tech in AI — is growing cautious about the outlook for demand. The company has said it expects to spend $80 billion this fiscal year on AI data centers, and, on a late January earnings call, Chief Executive Officer Satya Nadella said Microsoft has to sustain spending to meet “exponentially more demand.”
Microsoft in a statement on Monday reiterated its spending target for the fiscal year ending June, but declined to comment on TD Cowen’s note.
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” a company spokesperson said in the statement. “Our plans to spend over $80B on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand.”
European stocks tied to the energy sector dropped on the report, which may suggest big tech companies will need less power to run their data centers. Schneider Electric SE slid as much as 7.2%, while Siemens Energy AG fell more than 10%.
Critics have consistently pointed out a dearth of practical, real-world applications for AI, even as Microsoft, Meta and Amazon.com Inc. have pledged to spend billions on the datacenters needed to train, develop and host AI services.