Microsofts Data Center Lease Cuts Raise Concerns About AI Investment Strategy

**Microsoft Corporation** has begun terminating leases for a significant portion of its data center capacity in the United States. This move could indicate concerns that the company is building more computing power for artificial intelligence (AI) than it will need in the long run, according to a report from TD Cowen.

The **largest sponsor of OpenAI** has canceled leases with a combined capacity of «a few hundred megawatts,» as reported by an American brokerage firm on Friday, referencing supply chain inquiries or channel checks. Microsoft has also stopped entering into what are known as qualification agreements, which typically lead to official lease contracts, according to TD Cowen. This tactic was previously employed by competitors like **Meta Platforms Inc.** when they aimed to reduce capital expenditures, the brokerage noted.

Microsoft’s cost-cutting and data center construction efforts raise questions about whether the company—a leader in the AI tech space—is fearing a decline in demand. The company stated it plans to spend $80 billion on AI data centers in this fiscal year, and during a call discussing quarterly results at the end of January, CEO Satya Nadella mentioned that Microsoft must continue to invest to meet the «exponentially growing demand.»

In a statement released on Monday, Microsoft confirmed its **expenditure plans** for the fiscal year ending in June but declined to comment on TD Cowen’s memo.

«While we may strategically accelerate or adjust our infrastructure in some areas, we will continue to actively grow across all regions,» a company representative stated. «Our plans to spend over $80 billion on infrastructure this fiscal year remain intact as we continue to grow at a record pace to meet customer demand.»

Critics consistently highlight the lack of practical, real-world applications of AI, despite Microsoft, Meta, and **Amazon.com Inc.** promising to invest billions in the necessary data centers for training, developing, and hosting AI services.

Wall Street has increased its scrutiny of substantial spending following the release of a new open-source AI model by Chinese newcomer DeepSeek, which claims to rival American technologies at a fraction of the cost.

«While we have yet to determine the reasons behind this, our channel checks suggest that it relates to a potential oversupply from Microsoft,» wrote TD Cowen analysts Michael Elias, Cooper Belanger, and Gregory Williams, emphasizing that this is simply their interpretation.

Microsoft executives have consistently downplayed concerns regarding excess AI capacity. The company is spending more than ever before, primarily on chips and data centers needed for energy-intensive AI services.

In Friday’s report, TD Cowen analysts mentioned that their channel checks revealed a number of signals indicating Microsoft’s gradual withdrawal from data center construction and acquisition. They learned that Microsoft allowed over a gigawatt of major facility agreements to expire and turned down «multiple» deals, each involving around 100 megawatts (data center capacity is often measured in terms of the power required for their operation).

«Our channel checks indicate that Microsoft is also reallocating a significant portion of its anticipated international spending toward the U.S., which we believe suggests a substantial slowdown in international leasing,» the analysts noted.

*Meta and its products (Instagram, Facebook) are banned in the Russian Federation.*

[Source](https://www.bloomberg.com/news/articles/2025-02-24/microsoft-cancels-leases-for-ai-data-centers-analyst-says?srnd=phx-ai)