TD Cowen noticed Microsoftdoing something strangeon Friday . The Open AI partner and technical school giant appeared to be scratch data middle lease . According to the marketplace analyst , this is part of a wider pattern . TD Cowen said Microsoft had an “ oversupply ” trouble . It ’s another datapoint that points to Big Tech ’s nerves around its magnanimous bet on AI .
TD Cowen published itsquick takeon February 21 and articulate its research into Microsoft ’s data center business had turned up something interesting . “ Our groove checks indicate that [ Microsoft ] has 1 ) cancelled letting in the U.S. totalling ‘ a duo of hundreds [ megawatts ] ’ with at least two secret data center operators , 2 ) has pulled back on the changeover of [ statements of qualification ] to leases , and 3 ) has re - allocate a considerable portion of its international spend to the U.S. ”
A statement of qualification or SOQ is a precursor to the signing of a letting . TD Cowen observe that the conversion rate of an SOQ into a signed lease is almost 100 % so it ’s odd for the tech behemoth to kill them . It could be a dialogue tactic or it could be a sign of a wider market shift . “ When couple with our prior channel stoppage , it points to a potential oversupply position for [ Microsoft , ] ” TD Cowen said in its quick take .
The Microsoft China headquarters building in Xuhui Caohejing Development Zone in Shanghai, China, 2 February 2025. (Photo credit should read CFOTO/Future Publishing via Getty Images)©CFOTO/Future Publishing via Getty Images
The lease are n’t the only sign that Microsoft is cool down down its AI spend . “ Microsoft walk forth from multiple +100MW deals in multiple markets that were in early/ mid stagecoach of negotiations , countenance a +1GW of [ varsity letter of Intent ] on larger footprint sites conk , and walked aside from at least five land parcels that it had under construction in multiple Tier 1 market , ” TD Cowen said .
Part of what ’s going on is that Microsoft , like other technical school company , is call to do more commercial enterprise in the U.S. follow the election of Donald Trump . America and the market are waiting with bated hint to see what issue Trump ’s tariff and presidentship will have on the market . He ’s deregulating AI but he ’s also making everything more expensive . When the world becomes more uncertain , society spend less .
In January Microsoft promise that it would expend $ 80 billion ondata centre in America . It ’s also live all in on lowly modular nuclear reactors to power these data point gist and is even work on spinning up a long - dormant nuclear reactor at Three Mile Island . But it also paused construction on a data centre mean to service Open AI in Wisconsin in the first place this year , leave $ 3.3 billionin limbo .
Microsoft has a hand in Open AI , which make the popular ChatGPT . But it also possess CoPilot , a service it ’s been hear to force on Windows and Office user . Everyone hates it . It run Bing , an also - ran search locomotive that ’s incorporating more and more AI slop that everyone also hates .
CEO Satya Nadellapumped the brakeson AI plug in a podcast coming into court last hebdomad , too . Nadella told Dwarkesh Patel that he did n’t buy into the idea of artificial general intelligence — something OpenAI founder Sam Altman has been bullish on — and said it was fourth dimension for AI to begin showing the market some yield .
consort to TD Cowen , the signal all point to a step-down in AI - related outgo from Microsoft . “ The order of magnitude of both potential data point center capacity it walk away from and the conclusion to pullback on land acquisition ( which support core long - term capacitance increment ) in our view indicates the exit of a major requirement signal that Microsoft was earlier react to and that we believe the shift in their appetency for capacity is tie to OpenAI , ” it said .
Microsoft pushed back on some of this later when it talked to the occupation pressure . “ While we may strategically pace or adjust our substructure in some area , we will retain to turn strongly in all regions , ” a Microsoft spokespersonsaid in a financial statement to Bloomberg . “ Our architectural plan to pass over $ 80B on infrastructure this [ financial class ] remain on track as we bear on to grow at a track record stride to meet customer demand . ”
It ’s unclear how much demand there really is for massive data nub and the large language fashion model they support .
AIdata centersMicrosoftOpenAI
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