Microsoft is reportedly canceling leases for AI data centers, signaling a potential oversupply in the AI infrastructure market. The tech giant has voided leases totaling “a couple of hundred megawatts” of capacity in the U.S., according to TD Cowen analysts. Microsoft has also stopped converting “statement of qualifications,” agreements that typically lead to formal leases. This tactic was previously used by Meta when it decided to cut back on capital spending. These moves raise concerns about whether Microsoft is building more AI computing power than it needs long-term. Despite major investments by tech giants in AI data centers, some analysts claim there are few practical applications for the technology. This shift in strategy has raised concerns about whether the AI infrastructure boom is beginning to cool. Microsoft was the most active data center lessee in 2023 and the first half of 2024, securing capacity to support the rapid expansion of OpenAI workloads. However, recent reports suggest that the company has walked away from multiple large-scale deals and allowed over a gigawatt of Letters of Intent (LOIs) on major sites to expire.

Analysts suggest Microsoft may be using power and facility delays as a justification for terminating agreements, a tactic Meta previously used when it canceled multiple U.S. data center leases after scaling back its $48 billion metaverse investment. In addition to scrapping leases, Microsoft is reportedly slowing down the conversion of Statement of Qualifications (500’s)—preliminary agreements that usually lead to signed leases—raising further uncertainty about its long-term expansion strategy. Microsoft appears to be reallocating a significant portion of its projected international data center spending back to the US, suggesting a potential slowdown in global expansion. This is occurring despite the company’s previous efforts to extend its cloud and AI capabilities into international markets. Microsoft’s decision to halt construction on a Wisconsin data center—previously believed to be intended for OpenAI operations—further supports the notion that its AI-driven infrastructure expansion may be recalibrating.

However, earlier Microsoft said that it expects to spend approximately $80 billion in FY 2025 to build out AI-enabled data centers to train AI models and deploy AI and cloud-based applications around the world. More than half of this total investment will be in the United States. This $80 billion reflects a significant increase from the $53 billion in capital expenditures Microsoft made in 2023. Microsoft’s data center build-out in the U.S. and beyond has already been extensive. Documents leaked last April revealed it had more than 5GW of capacity at its disposal, with plans to add an additional 1.5GW in the first half of 2025. Despite this, it has been reported that OpenAI is looking to work with other data center providers because Microsoft is unable to keep up with its demands. OpenAI and Microsoft are said to have been working on plans for a massive 5GW data center known as Stargate, that could open by 2028.

The US is seeing booming demand from data centers to power AI. US utilities are finally signing concrete supply deals with data-center operators as the artificial intelligence wave sparks a surge in power demand, paving the way for higher profits in the coming quarters. Data centers are expected to account for 8% of the power generated in the US by 2030, compared with 3% in 2022, according to a Goldman Sachs report in May. Constellation Energy signed an exclusive deal with Microsoft to restart one of the units at the Three Mile Island nuclear plant in Pennsylvania. Under the agreement, the utility will provide 835 megawatts (MW) of energy to the tech giant’s data centers. The deal would also mark the first-ever restart of a nuclear power plant in the US after it was shut down.