TD Cowen analysts reveal: Microsoft has abandoned new data center projects in the United States and Europe
TD Cowen analysts pointed out that Microsoft has abandoned new data center projects in the United States and Europe due to an oversupply of artificial intelligence computing demand. Previously, Microsoft canceled leasing agreements with several private data center operators, involving hundreds of megawatts of power. Analysts believe this indicates an oversupply of data centers. Meanwhile, Google and Meta have taken over some of the leases abandoned by Microsoft. Microsoft plans to invest $80 billion in building AI data centers within this fiscal year, but future growth will slow down
According to TD Cowen analysts, Microsoft has abandoned new data center projects in the United States and Europe, which were originally planned to consume 2 gigawatts of power. Analysts attribute this move to an oversupply of computer clusters supporting artificial intelligence operations.
Earlier in February, a related report from TD Cowen drew significant market attention and caused unease among investors. The report stated that Microsoft had canceled several lease agreements with multiple private data center operators, involving a total power capacity of hundreds of megawatts. They also indicated that the latest actions reflect Microsoft's abandonment of some new business with OpenAI.
Earlier this year, Microsoft and OpenAI announced that they had modified their long-standing cooperation agreement, allowing OpenAI to use cloud computing services from other companies, provided that Microsoft itself does not require that portion of the business.
In the latest research report released by TD Cowen analysts on Wednesday, it was noted that Microsoft's contraction strategy over the past six months includes lease cancellations and delays. Meanwhile, Google has stepped in to take over some of the leases that Microsoft abandoned in Europe, while Meta has secured some of the released capacity in Europe.
TD Cowen analysts Michael Elias, Cooper Belanger, and Gregory Williams wrote in the report: "We still believe that lease cancellations and capacity delays indicate an oversupply of data centers, with a significant surplus compared to current demand forecasts."
Microsoft previously stated that it would spend about $80 billion to build artificial intelligence data centers in the fiscal year ending in June, but the growth rate will begin to slow thereafter. Company executives indicated that after a frenzied expansion to support OpenAI and other AI projects, spending will shift from new projects to equipping data centers with servers and other equipment.
Spokespersons for Microsoft, Meta, and Google did not comment on TD Cowen's research report on Wednesday.
Earlier this week, Alibaba Group Chairman Joseph Tsai warned that the AI data center construction by American manufacturers may be forming a bubble, raising concerns about the hundreds of billions of dollars in AI investments by global tech giants.
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