Analyst says Microsoft cancels US data centre leases, hinting at AI slowdown
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The news: Microsoft has scrapped leases for “a couple of hundred megawatts” of US data centre capacity, according to TD Cowen analysts, a rare move that suggests it may be rectifying an oversupply of AI infrastructure.
The company also paused converting statements of qualifications (SOQ’s) into leases and may be shifting investment from abroad to the US, the analysts said in a research note published Friday (Saturday AEDT).
The context: The report comes as investors question the long-term demand for AI infrastructure, particularly after China’s DeepSeek unveiled AI models at lower costs than US firms.
In response, a Microsoft spokesperson told media the company’s plans to spend USD80 billion ($126 billion) on infrastructure this financial year “remain on track as we continue to grow at a record pace to meet customer demand."
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” the spokesperson said.
The report is believed to have contributed to a market sell-off last Friday that hit AI-linked stocks like Nvidia and Broadcom.
The TD Cowen report said Microsoft terminated the leases using “facility/power delays as justification,” which is a known tactic employed by others, such as Meta when curbing capital spending.
What they said: “Our channel checks indicate that MSFT has 1) cancelled leases in the US totaling ‘a couple of hundred MWs’ with at least two private data center operators, 2) has pulled back on the conversion of SOQ’s to leases, and 3) has re-allocated a considerable portion of its international spend to the U.S.,” said the TD Cowen note.
“When coupled with our prior channel checks, it points to a potential oversupply position for MSFT,” it added.
In a separate note, Jefferies, which is hosting Microsoft's investor relations team in Sydney, said the company “strongly refuted” any change to its data centre strategy.
