(Bloomberg) — Microsoft Corp. has canceled some leases for US data center capacity, according to TD Cowen, raising broader concerns over whether it’s securing more AI computing capacity than it needs in the long term.
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OpenAI’s biggest backer has voided leases in the US totaling “a couple of hundred megawatts” of capacity — the equivalent of roughly two data centers — canceling agreements with at least a couple of private operators, the US brokerage wrote Friday, citing “channel checks” or inquiries with supply chain providers. TD Cowen said its checks also suggest Microsoft has pulled back on converting so-called statements of qualifications, agreements that usually lead to formal leases.
Microsoft in a statement on Monday reiterated its spending target for the fiscal year ending June, but declined to comment on TD Cowen’s note.
Exactly why Microsoft may be pulling some leases is unclear. TD Cowen posited in a second report on Monday that OpenAI is shifting workloads from Microsoft to Oracle Corp. as part of a relatively new partnership. The tech giant is also among the largest owners and operators of data centers in its own right and is spending billions of dollars on its own capacity. TD Cowen separately suggested that Microsoft may be reallocating some of that in-house investment to the US from abroad.
“While we have yet to get the level of color via our channel checks that we would like into why this is occurring, our initial reaction is that this is tied to Microsoft potentially being in an oversupply position,” TD Cowen analysts Michael Elias, Cooper Belanger and Gregory Williams wrote.
Microsoft shares were little changed in premarket trading on Monday.
A potential lease pullback by Microsoft raises broader questions about whether the company — one of the frontrunners among Big Tech in AI — is growing cautious about the outlook for overall demand. The company has said it expects to spend $80 billion this fiscal year on AI data centers, and on a late January earnings call, Chief Executive Officer Satya Nadella said Microsoft has to sustain spending to meet “exponentially more demand.”
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” a Microsoft spokesperson said in the company’s statement. “Our plans to spend over $80 billion on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand.”
