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Microsoft stock slips after analysts say it canceled 2 AI data center leases, suggesting possible 'oversupply position'

Feb 24, 2025 - businessinsider.com
Microsoft's stock declined slightly after a TD Cowen analyst note revealed the company is canceling some US data center leases, suggesting a potential oversupply and lower-than-expected AI demand. The analysts noted that Microsoft has canceled leases totaling several hundred megawatts with private data center operators and reallocated international spending to the US, indicating a slowdown in international leasing. They also mentioned a shift in OpenAI workloads to Oracle/SoftBank, linked to the new Stargate venture, which could be impacting Microsoft's data center demand.

Despite these developments, Microsoft maintains that its AI data center spending remains on track, with plans to invest $80 billion this fiscal year. The company asserts that it is well-positioned to meet current and increasing customer demand, although it may strategically adjust its infrastructure. CEO Satya Nadella emphasized the importance of aligning supply and demand in AI and cautioned against overhyping supply-side capabilities without translating them into real customer value. Wall Street is now looking to Nvidia's upcoming earnings release for further insights into AI spending trends.

Key takeaways:

  • Microsoft's stock declined after reports of canceling some US data center leases, indicating potential oversupply.
  • TD Cowen analysts suggest a shift in OpenAI workloads to Oracle/Softbank, affecting Microsoft's data center demand.
  • Microsoft plans to spend $80 billion on AI data centers this fiscal year, despite strategic adjustments in infrastructure.
  • CEO Satya Nadella emphasizes the importance of global productivity and GDP growth as metrics for AI progress.
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