- Microsoft’s (MSFT) stock fell 1% to $404.25 as the company canceled leases for 200 megawatts of U.S. data center capacity, hinting at a potential oversupply amid its $80 billion AI infrastructure push, per TD Cowen.
- Analysts suggest OpenAI’s shift to Oracle (ORCL) and breakthroughs from cost-effective Chinese AI firm DeepSeek may be prompting Microsoft to rethink its aggressive data center expansion, raising doubts about AI demand.
- The lease cancellations mark a shift for Microsoft, which has spent billions to meet AI needs, possibly reflecting a saturated capacity buildup or cooling demand after lackluster cloud sector results, according to Bernstein.
Microsoft’s (MSFT) stock is feeling the heat, dipping about 1% to $404.25 in midday trading Monday, a quiet stumble for a tech titan that lagged its Big Tech peers last year. The slide comes amid whispers of a surprising pivot: the Redmond giant has axed leases for roughly 200 megawatts of data center capacity across the U.S., enough juice to power two hefty facilities. TD Cowen’s analysts, digging through supply chain chatter, flagged this rollback – coupled with Microsoft’s retreat from converting preliminary agreements into formal leases – as a sign the company might be swimming in an oversupply of infrastructure, a stark contrast to its $80 billion data center spending spree planned for this fiscal year.
Theories abound on what’s driving this move. TD Cowen speculates that OpenAI, Microsoft’s prized AI partner, could be shifting workloads to Oracle Corp (ORCL) under a fresh alliance, easing the pressure on Microsoft’s own servers. But there’s a bigger shadow looming—skepticism is creeping into the market about the AI gold rush. Investors, burned by slow returns on the billions poured into AI setups, are eyeing breakthroughs like those from Chinese upstart DeepSeek, which is churning out high-octane AI tech at bargain-basement costs. If Microsoft’s pulling back, it might signal a rare moment of caution from a company that’s been bulldozing past supply bottlenecks to stake its claim in the AI frontier.
This isn’t the Microsoft of old, content to rest on Windows and Office laurels. The company’s been all-in on AI, leaning hard into its OpenAI partnership to fuel Azure’s cloud growth and power tools like Copilot. Canceling leases with at least two private data center operators marks a jarring shift for a firm that’s thrown cash at the problem to keep pace with demand. Bernstein’s Mark Moelder sees a mixed bag: it could hint at softer demand, especially after cloudy quarterly reports from the cloud giants, but it also reflects Microsoft’s massive capacity buildup over recent years finally hitting a saturation point.
The stakes are high in this AI arms race. Microsoft’s bet was that insatiable demand would justify the billions spent on steel-and-silicon fortresses, yet DeepSeek’s rise and OpenAI’s potential pivot suggest the landscape’s shifting faster than expected. A 200-megawatt pullback might seem like a rounding error in an $80 billion budget, but it’s enough to raise eyebrows—could the tech titan be rethinking its breakneck expansion? For now, the stock’s 4% year-to-date negative return and the lease cancellations paint a picture of a company at a crossroads, balancing its AI ambitions against a market starting to question whether the hype’s outpaced the reality.
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