Analyst note claims Microsoft has cancelled leases for AI data centres and what makes it important

Microsoft has reportedly canceled multiple leases for data centres in the US. This move is said to stem from the tech giant’s concerns about making more investment in AI infrastructure than it may need in the long term.
A report published by the US-based brokerage firm TD Cowen’s analysts (seen by Bloomberg) cited its channel checks and inquiries with supply chain providers to claim that Microsoft, which also backs OpenAI, has voided leases totalling “a couple of hundred megawatts” of capacity.
According to the report, Microsoft is even using a tactic that was deployed by Facebook-parent Meta to reduce its capital spending — stopping the conversion of “statement of qualifications” — agreements that usually lead to formal leases.
The analysts added that their channel checks revealed several signs of Microsoft's gradual withdrawal from data centre construction and acquisition.
They claimed to have found that Microsoft allowed agreements for larger sites—totalling more than a gigawatt—to expire and walked away from “multiple” deals, each involving about 100 megawatts (a data centre’s capacity is often stated in terms of the power it needs to stay up and running).
“Our channel checks indicate that Microsoft is also re-allocating a considerable portion of their projected international spend to the US, which suggests to us a material slowdown in international leasing,” the analysts noted.

Despite major investments by tech giants in AI data centres, some analysts claim that there are few practical applications for the technology, the report added. Wall Street also raised concerns after DeepSeek, a Chinese startup, introduced an open-source AI model that promises similar capabilities at a much lower cost.
Just like other tech companies, Microsoft may also be reassessing its AI spending following the popularity of DeepSeek.
“While we have yet to get the level of colour via our channel checks that we would like into why this is occurring, our initial reaction is that this is tied to Microsoft potentially being in an oversupply position,” TD Cowen analysts Michael Elias, Cooper Belanger and Gregory claimed
However, earlier Microsoft said that it expects to spend $80 billion on AI data centres this fiscal year. During an earnings call in January, CEO Satya Nadella stated that the company must continue spending to meet “exponentially more demand.”
“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions. Our plans to spend over $80B on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand,” a company spokesperson also noted in a statement to Bloomberg.