Microsoft shares fell Monday after investment bank TD Cowen reported cancelled leases from the tech giant in two US data centers.
Stocks fell 1.8% during trading Monday, but then reverted to $404.04, according to MarketWatch data.
According to a copy of the TD Cowen report cited by Bloomberg, Microsoft has ended its selective leases with at least two private data center operators in multiple US markets, occupying “hundreds of megawatts” of power.
According to the Electric Reliability Council of Texas, one megawatt can power 250 homes during peak usage hours.
“We haven’t got the color levels yet via channel checks as to why this is happening, but the initial reaction is that this is tied to Microsoft’s potentially oversupply positioning. That’s it,” writes TD Cowen.
Artificial intelligence relies heavily on large amounts of data and requires increased computing power, increased storage, and faster network speeds. All of these are provided.
However, it claims that new open source AI models like Deepseek operate at a fraction of the cost of American rivals. AI developers may be reevaluating where they spend their money.
Industry sources familiar with the issue say Decrypt Microsoft’s pullback reflects changes in Openai workloads to competitors like Oracle.
Oracle, Google and Meta all have seen a significant increase in demand year-on-year, while Amazon’s demand remains stable.
According to tracking figures on the website data center map, there are currently 3,317 data centers in the US alone.
Addressing questions about changing data center approaches, Microsoft reaffirmed its ongoing growth and commitment to infrastructure investments to meet the growing demand of its customers.
“We can strategically pace or adjust the infrastructure in some regions, but we will continue to grow in all regions,” a Microsoft spokesperson said in a statement. “This allows us to invest and allocate resources to growth areas for our future.”
Microsoft is planning to spend $80 billion on “infrastructure” in 2025, a spokesman said.
“Microsoft is adjusting data center usage targets over the coming years, with increasing competition in which other players have launched new projects,” Will Foxley, co-founder of Blockspace Media, told Decrypt.
“We don’t consider TD Cowen Note to be notable in the long run as Microsoft is still actively expanding its budget to grow its data centers.”
Foxley, former director of compass mining’s media and strategy, noted that such cancellations or adjustments are common in large companies.
“It’s likely that companies like Microsoft are negotiating many data centers globally at the same time,” he explained. “Some cancellations aren’t particularly surprising.”
In contrast, Foxley noted that stocks to cancel data center leases could be significantly higher for Bitcoin miners.
“The miners have less capital and operate under a more stringent timeline,” Foxley said. “That means cancellations can quickly lead to catastrophic consequences.
Edited by Sebastian Sinclair
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