Microsoft shares dipped slightly on Monday after an analyst report suggested the company had canceled certain U.S. data center leases, possibly indicating an oversupply of AI infrastructure.
On Friday, TD Cowen analysts reported that the tech giant had canceled leases totaling “a couple of hundred megawatts,” roughly equivalent to the capacity of two data centers. According to the note, Microsoft cited “facility/power delays” as a reason for the terminations in some cases, a justification previously used by Meta for canceling data center leases.
TD Cowen also observed that Microsoft has scaled back on converting statements of qualification—agreements that usually transition into standard leases. The analysts were uncertain whether these actions indicate a temporary pause or a full termination of the agreements.
The company may be facing an “oversupply position,” as the note mentioned that Microsoft has declined other data center and land acquisition deals. TD Cowen analysts suggested this reflects “the loss of a major demand signal that Microsoft was initially responding to” and believe the shift in its capacity needs is linked to OpenAI.
By noon, the company’s stock had declined approximately 1.2% and has dropped over 4% since the beginning of the year.
A Microsoft spokesperson, in a statement, emphasized the company’s strong position to meet growing customer demand, citing substantial past investments. “Last year alone, we added more capacity than any prior year in history,” they noted, without directly addressing the analyst report. “While we may strategically pace or adjust our infrastructure in certain areas, we will continue to expand significantly across all regions. This approach enables us to invest in and allocate resources toward key growth areas for the future.”
The spokesperson also confirmed that Microsoft’s plan to invest over $80 billion in AI infrastructure this fiscal year remains on course.
Last week, The Information reported that OpenAI informed investors it expects the Stargate Project—developed in collaboration with SoftBank and Oracle—to supply 75% of the computing power needed for its AI models by the end of the decade, marking a shift away from Microsoft.
On Monday, Bank of America analysts noted that Microsoft is “strongly refuting” any changes to its data center strategy.
Bank of America analysts stated that Microsoft makes investments based on a long-term, 10-year outlook for cloud and AI demand. “They adjust their forecasts over time on a regional basis, prioritizing areas where demand is highest,” the analysts explained.
