Microsoft disinvestment in AI data centers has some in tech industry wondering what’s next

Microsoft is pulling back from AI data center investments, a move that has some tech industry analysts wondering what the future holds.

The news came from a Feb. 21 TD Cowen report, shared with IT Brew, where a team of evaluators led by Senior Equity Research Analyst Michael Elias detailed how the company is canceling leases with “at least two private data center operators” that would cover around 200 megawatts of capacity. It’s a move that casts some doubt on the future of the tech industry’s AI investment and drew comparisons to Meta’s data center disinvestment in 2022.

Tea leaves. As the report notes, the lease cancellation is part of a larger shift from Microsoft. TD Cowen analysts, through “channel checks”—looking at distribution channels as a way of examining a company’s actual priorities and actions—found that Microsoft has also walked away from negotiations for 100 megawatt deals, let some leases expire, and left land leases in Tier 1 markets.

Oversupply might be the issue. “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,” TD Cowen wrote.

Other explanations. Or it might just be a company with tens of billions invested in AI data centers making some corrections. That’s what Mizuho Securities analyst Jordan Klein told Bloomberg in a note on Feb. 23.

“To me, this all looks and sounds like business as usual,” Klein wrote. “A company this large and with $80 billion of annual spend has the right to move in and out of data center leases, many of which were never officially signed.”

That’s the line Microsoft is going with, too. A company spokesperson told CNBC that its investment targets remain in range, though it’s possible in the process that it “may strategically pace or adjust our infrastructure in some areas.”

“Our plans to spend over $80B on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand,” they wrote.