Microsoft reportedly cancels some data center leases amid $80 billion AI push - chof 360 news

Microsoft (MSFT) has canceled an unspecified number of data center leases amid the AI spending boom, TD Cowen analysts said in a note.

The development comes as investors are closely watching whether Big Tech hyperscalers will continue to spend heavily on AI infrastructure.

Microsoft operates data centers equipped with thousands of servers housing advanced computing chips such as Nvidia’s (NVDA) to power its Azure cloud and AI applications. A typical data center operated by a Big Tech "hyperscaler" firm like Microsoft uses over 100 megawatts of power.

“Our initial reaction is that this is tied to Microsoft potentially being in an oversupply position,” TD Cowen's Michael Elias wrote in a note late Friday. Elias had previously written in January that Microsoft is abandoning new leasing deals for data centers that it was previously interested in.

“[T]he magnitude of both potential data center capacity it walked away from and the decision to pullback on land acquisition (which supports core long term capacity growth) in our view indicates the loss of a major demand signal that Microsoft was originally responding to and that we believed the shift in their appetite for capacity is tied to OpenAI,” Elias wrote last Friday.

A Microsoft spokesperson told chof360 Finance in a statement, "While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions."

The spokesperson added, "[O]ur 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."

Microsoft shares were down just over 1% Monday.

Microsoft, the largest backer of OpenAI, has said it plans to spend $80 billion in capital expenditures in its fiscal year 2025, driven by its push in the artificial intelligence market. The company was also the largest buyer of Nvidia's (NVDA) AI chips in 2024, purchasing nearly half a million of its GPUs and contributing an estimated $20 billion to the chipmaker’s revenue, according to a DA Davidson analysis.

Microsoft recently announced its fiscal second quarter results, which showed the tech heavyweight has already spent $42 billion of its expected $80 billion in capital expenditures so far in 2025. The company's stock fell 6% following these results.

TD Cowen's Elias said in a separate note Monday morning that Microsoft still appears to be "active in the data center market."

"[W]e view this as a positive sign that Microsoft is still active to a degree, although it appears their run-rate data center demand is now lower vs. the torrid pace of leasing seen in 2023 and 1H24, during which time they led the data center leasing league tables amongst hyperscalers."

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