Investor concerns over a potential slowdown in Microsoft’s (MSFT.O) data centre expansion surfaced on Monday after an analyst report suggested the company had cancelled significant leasing agreements. The report fuelled scepticism that the AI-driven stock market surge may be losing momentum.
In a note released Friday, TD Cowen analysts stated that Microsoft had withdrawn from leasing agreements for substantial data centre capacity in the U.S., pointing to possible oversupply as the company expands its AI infrastructure. The analysts, led by Michael Elias, noted that Microsoft’s cancellations amounted to “a couple of hundred megawatts” with at least two private data centre providers, citing supply chain checks.
A Microsoft spokesperson reaffirmed that the company’s planned $80 billion investment in AI and cloud capacity for this fiscal year remains unchanged. “While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” the spokesperson said.
Microsoft’s stock remained largely unaffected, dipping 1% on Monday, but companies linked to its supply chain saw declines. Shares of Siemens Energy (ENR1n.DE) and Schneider Electric (SCHN.PA) fell 7% and 4%, respectively. U.S. utility firms Constellation Energy (CEG.O) and Vistra (VST.N), which supply power to data centres, also declined by 5.9% and 5.1%. Meanwhile, tech stocks broadly fell as the Nasdaq saw a wider selloff.
Investor unease over the massive AI infrastructure investments by U.S. tech firms has been increasing, particularly as Chinese startup DeepSeek has demonstrated AI technology at a lower cost than its Western competitors. TD Cowen analysts also noted that Microsoft had paused converting statements of qualification—an initial step toward formal leasing agreements—a strategy previously adopted by Meta Platforms (META.O) to reduce capital expenditures.
Dan Morgan, senior portfolio manager at Synovus Trust, which holds Microsoft shares, commented on the developments, stating, “I don’t construe it as any change up in the big macro picture. Their desire is to build out these data centres.”
Adding further insight, Moelder stated, “Microsoft needed to meet demand and had a great deal of difficulty finding capacity. Management may, therefore, have rented, even at a meaningful premium, data centres and GPU capacity and negotiated more deals for additional future capacity than they needed.”
If Microsoft is indeed scaling back leases, it would mark a notable shift for the company, which has invested billions in data centres to alleviate supply constraints that have hampered its ability to meet AI-driven demand.
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