MW The research note that's raising eyebrows: Microsoft reportedly is cancelling data-center leases.

By Steve Goldstein

OpenAI could be reason Microsoft is recalibrating plans, analysts say

Is Microsoft starting to have doubts after artificial-intelligence demand?

A research note written by TD Cowen analysts say Microsoft has cancelled leases in the U.S. with at least two private data-center operators totalling a couple hundreds of megawatts and also is not converting so-called statements of qualifications into leases.

The analysts also say Microsoft $(MSFT)$ has re-allocated a considerable portion of its international spending to the U.S.

"When coupled with our prior channel checks, it points to a potential oversupply position for Microsoft," say the analysts led by Michael Elias. The analysts, who cover companies including American Tower $(AMT)$, Akamai Technologies $(AKAM)$ and Digital Realty Trust (DLR), say the Microsoft shift could be tied to OpenAI, the ChatGPT maker that's partly held by the software giant.

"Consider this: Microsoft was the most active lessee of capacity in 2023 and 1H24, at which time it was procuring capacity relative to a capacity forecast that contemplated incremental OpenAI workloads. However, as we believe is indicated by its decision to pause construction on a data center in Wisconsin-which our prior channel checks indicated was to support OpenAI-there is capacity that it has likely procured, particularly in areas where capacity is not fungible to cloud, where the company may have excess data center capacity relative to its new forecast," they say.

Microsoft for its part reiterated its plan to spend $80 billion on infrastructure, and told Bloomberg in a statement that it "may strategically pace or adjust our infrastructure in some areas."

Satya Nadella, the Microsoft chairman and chief executive, talked last week about how there has to be indications that AI demand will meet supply, which he says will be demonstrated if global economic growth accelerates.

A key check on AI demand will come on Wednesday, when Nvidia $(NVDA)$ reports results after the close of trading.

Microsoft and Nvidia shares rose in premarket trade after losses on Friday.

-Steve Goldstein

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February 24, 2025 04:31 ET (09:31 GMT)

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