Bloomberg reports that analysts at TD Cowen, who previously suggested that Microsoft walked away from leases totalling several hundred megawatts in February, have now indicated the company intends to abandon new projects totalling two gigawatts.
The latest pullback, which includes lease cancellations and deferrals, comes as Microsoft appears to be distancing itself from further commitments to OpenAI. The ChatGPT maker is now seeking computing power elsewhere, including a deeper partnership with Oracle on the $500 billion Stargate project.
At the turn of the year, Microsoft president Brad Smith said the company planned to invest $80 billion in AI data centres this year, with half earmarked for the US.
Microsoft is now reportedly reconsidering these investments over fears it has overextended itself, with the company allegedly using delays in getting power to some facilities as grounds to terminate lease agreements — a tactic reminiscent of Meta’s recent attempts to exit US data centre leases following its lacklustre metaverse efforts.
TD Cown analysts wrote that the lease cancellations and deferrals “points to data centre oversupply relative to its current demand forecast”.
The findings came mere days after Alibaba Group chair Joe Tsai warned of an investment bubble in the data centre market, claiming US firms were throwing money at scaling despite a lack of demand.
“People are talking, literally talking about $500 billion, several 100 billion dollars. I don’t think that’s entirely necessary,” Tsai said. “People are investing ahead of the demand that they’re seeing today, but they are projecting much bigger demand.”
While Microsoft has abandoned some of its leases, the analysts suggested that rivals may benefit, with both Google and Meta reportedly eyeing sites vacated by Microsoft.
Pullbacks aside, Microsoft secures Dublin data centre approval
While Microsoft is scaling back its data centre efforts, that hasn’t stopped it from getting the go-ahead for a new site in one of the world’s most congested markets: Dublin.
Ireland’s planning appeals board approved a data centre project by energy supplier Energia, to be operated by Microsoft.
The plans date back to 2022 but were contested by environmental groups and Heritage body An Taisce, who expressed concern over adding yet another data centre to Dublin’s already constrained grid — with their objection raised shortly after EirGrid’s ban on new data centre applications for the city until 2028.
The proposed facility, located adjacent to Huntstown Power Station in the northwestern suburb of Finglas, was approved by planners last week.
The appeals board concluded the project's power management measures and access to renewable energy would adequately protect local power supplies.
The move comes shortly after Ireland's energy regulator proposed new rules that would force new data centres to provide power generation capabilities to match their capacity demand to reduce strain on the national grid.
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