Microsoft has reportedly canceled leases for significant data center capacity in the U.S., signaling a potential oversupply as the tech giant expands its artificial intelligence infrastructure, according to brokerage TD Cowen. This move comes amid growing investor skepticism over the billions of dollars being funneled into AI infrastructure by U.S. tech firms, with concerns about slow returns and competitive breakthroughs from Chinese startups like DeepSeek, which have demonstrated advanced AI technology at a lower cost. Despite these developments, Microsoft remains committed to its plan of investing over $80 billion in AI and cloud capacity this fiscal year. A company spokesperson stated that while strategic adjustments may occur in certain areas, growth will continue across all regions. The news has impacted Microsoft’s shares, which fell about 1% in late morning trading. Bernstein analyst Mark Moelder noted that the cancellations could indicate lower demand, particularly after lackluster quarterly results from major cloud companies, but also reflect Microsoft’s previous capacity buildup. “Microsoft needed to meet demand and faced challenges finding capacity. Management may have rented data centers and GPU capacity at a premium and negotiated more deals than necessary,” Moelder explained. — news from Reuters
