Microsoft’s data center lease cancellations have raised investor skepticism about the AI-led stock-market boom. Analysts at TD Cowen noted that the tech giant has scrapped leases for hundreds of megawatts of capacity with private data-center operators, suggesting potential oversupply.
This news comes as Microsoft plans to invest $80 billion in AI and cloud capacity this fiscal year, despite concerns about slow payoffs and breakthroughs from Chinese startup DeepSeek. Related companies, such as Siemens Energy and Schneider Electric, also took a hit on Monday due to increased competition.
Microsoft’s data center build-out is still on track, but the lease cancellations may indicate lower demand or more efficient use of capacity. Analysts believe that Microsoft needed to rent data centers at a premium to meet demand, which could be reflected in future investments.
The news follows lackluster quarterly results from major cloud companies and raises questions about the sustainability of the AI-driven growth momentum. As one analyst noted, “I don’t construe it as any change up in the big macro picture.” Despite this, the data center lease cancellations are a notable development that warrants close attention from investors.
Source: https://www.reuters.com/technology/microsoft-shelves-ai-data-center-deals-sign-potential-oversupply-analyst-says-2025-02-24