Microsoft Corp. has pulled back on data center projects around the world, suggesting the company is taking a harder look at its plans to build the server farms powering artificial intelligence and the cloud.
The software company has recently halted talks for, or delayed development of, sites in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin, according to people familiar with the situation.
Microsoft is widely seen as a leader in commercializing AI services, largely thanks to its close partnership with OpenAI. Investors closely track Microsoft’s spending plans to get a sense of long-term customer demand for cloud and AI services.
It’s hard to know how much of the company’s data center pullback reflects expectations of diminished demand versus temporary construction challenges, such as shortages of power and building materials. Some investors have interpreted signs of retrenchment as an indication that projected purchases of AI services don’t justify Microsoft’s massive outlays on server farms.
Those concerns have weighed on global tech stocks in recent weeks, particularly chipmakers like Nvidia Corp. which suck up a significant share of data center budgets. Microsoft shares fell 2.3% to $373.32 at 10:34 a.m. in New York amid a broader market selloff, and were down about 9% for the year as of the Wednesday close.
Microsoft acknowledged making changes to its data center plans but declined to discuss most of the projects.
“We plan our data center capacity needs years in advance to ensure we have sufficient infrastructure in the right places,” a spokesperson said. “As AI demand continues to grow, and our data center presence continues to expand, the changes we have made demonstrates the flexibility of our strategy.”
Microsoft recently withdrew from negotiations to lease space between London and Cambridge in the UK at a site being marketed for its ability to host advanced Nvidia chips, according to people familiar with the talks, who requested anonymity to discuss a private matter.
The company has also halted negotiations for data center space at a site near Chicago, according to a person familiar with the talks.
Microsoft, which has leased excess cloud-computing capacity from CoreWeave Inc., recently backed away from a proposal to obtain more, CoreWeave Chief Executive Officer Michael Intrator said in an interview. Intrator didn’t say how many projects were affected or where they’re located but added that CoreWeave has found another buyer for the capacity. CoreWeave shares fell more than 8%.
In some cases, Microsoft is delaying construction. For example, it has paused work on parts of a data center campus it owns about an hour outside of Jakarta, according to people familiar with the situation.
Microsoft also has put on hold some planned expansion at a site in Mount Pleasant, Wisconsin, part of a complex visited by then-President Joe Biden, according to another person.
During the first six months developing the Wisconsin project, Microsoft spent $262 million on construction, according to documents seen by Bloomberg. Almost $40 million of that went to concrete alone.