Microsoft Corp. has walked away from new data center projects in the US and Europe that would have amounted to a capacity of about 2 gigawatts of electricity, according to TD Cowen analysts, who attributed the pullback to an oversupply of the clusters of computers that power artificial intelligence.
The analysts, who rattled investors with a February note highlighting leases Microsoft had abandoned in the US, said the latest move also reflected the company’s choice to forgo some new business from ChatGPT maker OpenAI, which it has backed with some $13 billion. Microsoft and the startup earlier this year said they had altered their multiyear agreement, letting OpenAI use cloud-computing services from other companies, provided Microsoft didn’t want the business itself.
Microsoft’s retrenchment in the last six months included lease cancellations and deferrals, the TD Cowen analysts said in their latest research note, dated Wednesday. Alphabet Inc.’s Google had stepped in to grab some leases Microsoft abandoned in Europe, the analysts wrote, while Meta Platforms Inc. had scooped up some of the freed capacity in Europe.
Microsoft has said it will spend about $80 billion building out AI data centers in its fiscal year that ends in June, but that the pace of growth should begin to slow after that. Executives have said that, after a frantic expansion to support OpenAI and other artificial intelligence projects, spending would shift from new construction to fitting out data centers with servers and other equipment.
Spokespeople for Microsoft, Meta and Google didn’t immediately comment on the research note on Wednesday.
Earlier this week, Alibaba Group Holding Ltd. Chairman Joe Tsai warned of a potential bubble in data center construction, saying new projects may exceed demand for AI services.
“We continue to believe the lease cancellations and deferrals of capacity points to data center oversupply relative to its current demand forecast,” TD Cowen analysts Michael Elias, Cooper Belanger and Gregory Williams wrote.
The analysts, who rattled investors with a February note highlighting leases Microsoft had abandoned in the US, said the latest move also reflected the company’s choice to forgo some new business from ChatGPT maker OpenAI, which it has backed with some $13 billion. Microsoft and the startup earlier this year said they had altered their multiyear agreement, letting OpenAI use cloud-computing services from other companies, provided Microsoft didn’t want the business itself.
Microsoft’s retrenchment in the last six months included lease cancellations and deferrals, the TD Cowen analysts said in their latest research note, dated Wednesday. Alphabet Inc.’s Google had stepped in to grab some leases Microsoft abandoned in Europe, the analysts wrote, while Meta Platforms Inc. had scooped up some of the freed capacity in Europe.
Microsoft has said it will spend about $80 billion building out AI data centers in its fiscal year that ends in June, but that the pace of growth should begin to slow after that. Executives have said that, after a frantic expansion to support OpenAI and other artificial intelligence projects, spending would shift from new construction to fitting out data centers with servers and other equipment.
Spokespeople for Microsoft, Meta and Google didn’t immediately comment on the research note on Wednesday.
Earlier this week, Alibaba Group Holding Ltd. Chairman Joe Tsai warned of a potential bubble in data center construction, saying new projects may exceed demand for AI services.
“We continue to believe the lease cancellations and deferrals of capacity points to data center oversupply relative to its current demand forecast,” TD Cowen analysts Michael Elias, Cooper Belanger and Gregory Williams wrote.