Microsoft Has Reportedly Been Backing Out Of Leases On US Data Centers

What’s going on here?

Microsoft has reportedly begun canceling leases on US data centers, potentially needing less capacity than it originally thought.

What does this mean?

After spending a year hoarding AI data center capacity, Microsoft seems to be into “less is more” all of a sudden. The Magnificent Seven firm has backed out of some data center deals, let other ones expire, and stopped converting “pre-leases” into actual leases – all moves that suggest it’s looking to tone down its AI expansion.

Investors have a reason to be jittery here. See, when Meta’s metaverse spending got out of hand, it wriggled out of data center deals too – so this could indicate overspending on Microsoft’s part. For now, though, the firm isn’t conducting an all-out retreat: it’s still planning to shovel $80 billion into AI infrastructure this year. But scaling back at such an early stage will undoubtedly raise eyebrows. AI has been the market’s golden goose – and if one of its biggest backers is rethinking capacity, folks could start wondering if the boom is overblown.

Why should I care?

For markets: When Microsoft taps the brakes, Alibaba floors it.

Alibaba is going all-in on AI, throwing a stunning $53 billion at infrastructure to transform itself from an e-commerce giant into an AI powerhouse. Being a slow mover has its perks: Alibaba can learn from Microsoft’s missteps and skip some trial-and-error costs. But if AI demand is cooling, even a savvy plan could backfire.

The bigger picture: Groundbreaking tech, meet ground-shaking tensions.

The US has been rolling out some tough economic restrictions, many of which are aimed at the world’s second-biggest economy. There’s the tighter scrutiny on Chinese investment in key US sectors, the brand-new fees on Chinese-built ships, and the country’s pressure on Mexico to slap tariffs on Chinese goods. And when tech and trade collide, expect volatility. AI dominance isn’t just about who builds what: it’s about who controls the supply chains.