Analyst flags potential slowdown in Microsoft’s data centre expansion

Microsoft has reportedly scrapped leases for significant data centre capacity in the United States, raising concerns about a potential slowdown in its AI infrastructure expansion.

TD Cowen analysts revealed that the company cancelled leases amounting to “a couple of hundred megawatts” with at least two private data-centre operators. The move has added weight to investor worries that the AI-driven market surge may be losing momentum.

Despite the lease cancellations, Microsoft maintains its commitment to invest over $80 billion in AI and cloud capacity this fiscal year.

A company spokesperson confirmed the investment plan remains intact, noting that adjustments to infrastructure are part of strategic planning rather than a broader scale-back.

While Microsoft’s stock dipped by 1%, related companies faced steeper declines. Siemens Energy and Schneider Electric saw losses of 7% and 4% respectively, while US utility firms Constellation Energy and Vistra dropped nearly 6% each.

Analysts suggest the lease cancellations might reflect a shift in Microsoft’s data centre strategy following years of aggressive expansion to meet AI demand.

Supply chain constraints had previously forced the company to secure excess capacity, sometimes at premium rates.

However, with growing investor scepticism around the costs of AI infrastructure and emerging competition from low-cost Chinese firms like DeepSeek, Microsoft’s recalibration has intensified concerns about the long-term sustainability of the AI boom.

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