An analyst notice flagging a doable slowdown by Microsoft in leasing knowledge centre capability grabbed the market’s consideration on Monday, lending credence to scepticism amongst traders frightened that the AI-led inventory market increase may be working out of steam.
TD Cowen analysts in a notice Friday mentioned the tech big had scrapped leases for sizeable knowledge centre capability within the US, suggesting potential oversupply because it builds out synthetic intelligence infrastructure.
The brokerage, citing its supply-chain checks, mentioned Microsoft has cancelled leases totalling “a few hundred megawatts” of capability with a minimum of two non-public knowledge centre operators, the analysts led by Michael Elias mentioned.
Microsoft’s plan to speculate over US$80-billion in AI and cloud capability this monetary 12 months stays on observe, an organization spokesman mentioned. “Whereas we could strategically tempo or alter our infrastructure in some areas, we’ll proceed to develop strongly in all areas,” the spokesman added.
Whereas Microsoft shares have been little affected — the inventory misplaced 1% on Monday — associated corporations took successful. Shares of German agency Siemens Power and French firm Schneider Electrical fell 7% and 4%, respectively.
US utility corporations Constellation Power and Vistra, which offer energy for knowledge centres, misplaced 5.9% and 5.1%, respectively. Tech bellwethers have been decrease as a part of a broader Nasdaq selloff.
Sluggish payoffs
Investor scepticism over the billions that US tech companies have channelled into AI infrastructure has grown resulting from gradual payoffs and breakthroughs at Chinese language start-up DeepSeek, which showcased AI tech at a a lot decrease value than its Western rivals.
Microsoft had additionally paused changing assertion of {qualifications}, or precursors to formal leases, TD Cowen analysts mentioned, including that different tech companies together with Meta Platforms had beforehand made comparable strikes to decrease capital spending.
Learn: Microsoft, Meta defend hefty AI spending after DeepSeek stuns tech world
“I don’t construe it as any change up within the large macro image. Their want is to construct out these knowledge centres,” mentioned Dan Morgan, senior portfolio supervisor at Synovus Belief, which owns shares in Microsoft.
Any lease cancellations would mark a pointy shift for Microsoft, which has been spending billions of {dollars} on knowledge centres to beat provide bottlenecks which have restricted its capability to satisfy AI demand.
The information may presumably point out decrease demand, Bernstein analyst Mark Moelder mentioned, particularly after lacklustre quarterly outcomes from main cloud corporations, however it was additionally reflective of the capability build-up at Microsoft up to now years.
“Microsoft wanted to satisfy demand and had a substantial amount of problem discovering capability. Administration could, due to this fact, have rented, even at a significant premium, knowledge centres and GPU capability and negotiated extra offers for extra future capability than they wanted,” Moelder added. — Aditya Soni, with Juby Babu, (c) 2025 Reuters
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