Despite investments in the tens of billions of dollars, Microsoft seems to have become less enthusiastic about building out its AI infrastructure globally. Data center projects on three continents have been halted. Why the apparent aversion to ever more AI?
Microsoft has halted or delayed planned data center projects in Indonesia, Great Britain, Australia, Illinois, North Dakota and Wisconsin, among other places, according to sources familiar with the situation, as Bloomberg reported earlier. This seems to contradict Microsoft’s previous ambitions as a leader in the commercialization of AI services, something its rivals are eager to claim as well.
Declining demand or temporary challenges?
It is unclear whether Microsoft has actually started to lose faith in the AI advance in a meaningful way. A shortage of power and building materials could also play a role. As of today, import tariffs are also set to be enforced on goods entering the US, in addition to reciprocal trade barriers for goods exiting the US to various nations. Nevertheless, there are doubts about the feasibility of the AI promise, tariffs or not, especially when it comes to its viability to amass profits.
Some investors have already seen Microsoft’s actions as a somewhat ominous indication of things to come. This has resulted in blows on the stock market, ever nervous when it comes to all things AI, which have only increased with the Trump tariff walls to kick the uncertainty up a notch. With all of these factors having a say in matters, Microsoft’s share price has already fallen 9 percent compared to the beginning of 2025.
Microsoft acknowledges to the press that there have been changes to its data center plans, but the company refuses to comment on most projects. “We plan our data center capacity years in advance to ensure that we have sufficient infrastructure in the right places,” a Microsoft spokesperson predictably stated. “As demand for AI continues to grow and our data centers continue to expand, the changes we have made demonstrate the flexibility of our strategy.”
Conflicting signals
The curtailment of data center projects is in stark contrast to previous statements by Microsoft. At the beginning of this year, VP Brad Smith announced that the company would invest 80 billion dollars in AI infrastructure during the fiscal year ending in June 2025. “More than half of this total investment will take place in the United States,” he stated at the time.
According to a report by investment bank TD Cowen, which has been quick to report on these matters several times, Microsoft has previously canceled leases for various data centers, representing “a few hundred megawatts” of capacity. It’s evident the doubt has been present for longer than just the past few weeks.
Data center construction bubble?
In the broader market, there are also concerns about possible overcapacity. At the end of March, Alibaba Group chairman Joe Tsai warned of a possible bubble in the construction of data centers. He argued that the pace of expansion could exceed the initial demand for AI services.
However, Michael Intrator, CEO of CoreWeave, which leases excess cloud computing capacity to Microsoft, claims that the withdrawal is specific to Microsoft. “It’s quite local, and their relationship with OpenAI has simply changed,” he said. “So it makes sense that there is some noise.” What’s more, Google is said to have already approached CoreWeave for additional capacity, as the latter company has plenty of demand anyway.
Despite the limitations, Microsoft confirms that it is still committed to its 3.3 billion dollar project in Wisconsin, which is expected to go online next year. A spokesman in Jakarta said that the planned Indonesia Central cloud region is on track to go live in the second quarter of 2025, without elaborating on the suspension of parts of the project.
Microsoft says it is sticking to its plan to spend around 80 billion dollars on the construction of data centers this fiscal year, which ends in June. Many of the investments have already been made. The company has previously indicated that the next fiscal year will see a slower pace of new infrastructure investments, with the focus shifting from new construction to equipping existing facilities with servers and other equipment. That contrast is now more sharply defined than ever.