Microsoft Scales Back U.S. Data Center Leases Amid AI Infrastructure Oversupply Concerns
- Written by Kiara Fabbri Former Tech News Writer
- Fact-Checked by Sarah Frazier Former Content Manager
Microsoft Corp. has canceled several data center leases in the U.S., leading to questions about the company’s long-term AI infrastructure strategy.
In a Rush? Here are the Quick Facts!
- Microsoft will still spend $80 billion on AI data centers this fiscal year.
- OpenAI may shift workloads to Oracle, reducing reliance on Microsoft’s cloud services.
- The move raises concerns about the long-term demand for AI infrastructure.
TD Cowen’s report, cited by Bloomberg , reveals that Microsoft has canceled leases for “a couple of hundred megawatts” of capacity—about two data centers.
The report, based on supply chain inquiries, indicates that Microsoft is reevaluating its data center requirements amid concerns over potential oversupply.
The move marks a shift for Microsoft, a company that had earmarked $80 billion for AI infrastructure spending in the fiscal year ending in June. Despite this pullback, the company maintains its commitment to significant spending, says Bloomberg.
Fortune reports that a Microsoft spokesperson reiterated in a statement that its plans to invest over $80 billion in infrastructure remain on track, adding that the company will continue to grow to meet customer demand.
However, the cancellation of leases raises doubts about whether Microsoft is scaling back its spending in response to potential overcapacity in the data center market, as noted by Fortune.
Skepticism surrounding the AI infrastructure market has grown in recent months, particularly after Chinese startup DeepSeek unveiled an AI model it claims rivals U.S. technology at a fraction of the cost.
While Microsoft has continued to invest heavily in AI infrastructure, the company’s recent actions suggest a potential slowdown in its data center construction.
Bloomberg reports that TD Cowen analysts noted that Microsoft has also halted the conversion of “statements of qualifications”—agreements that typically lead to formal leases.
They pointed out that Meta Platforms had used similar tactics in the past to reduce capital spending. Analysts further suggested that Microsoft might be reallocating its international spending toward the U.S., reflecting a slowdown in overseas data center leasing.
Fortune argues that the pullback could also be tied to changes in Microsoft’s relationship with OpenAI, its major AI partner. Reports indicate that OpenAI may be shifting some of its workloads to Oracle Corp., a move that could reduce Microsoft’s need for additional data center space.
In January, Microsoft announced an adjustment to its multiyear deal with OpenAI, allowing the AI startup to use cloud services from other providers, though Microsoft still retains the right of first refusal for computing capacity, says Bloomberg.
While analysts have suggested that Microsoft may be in an oversupply position, the company has downplayed concerns about overcapacity.
The large-scale investment in AI infrastructure, particularly in chips and data centers, remains critical to supporting Microsoft’s AI initiatives, according to the company, as noted by Reuters .
As Microsoft recalibrates its data center strategy, it remains to be seen how this will impact the broader AI infrastructure market and whether demand for these services will continue to grow as anticipated.
Photo by Radoslaw Prekurat on Unsplash
Qatar Partners with Scale AI To Enhance Government Services Using AI
- Written by Andrea Miliani Former Tech News Expert
- Fact-Checked by Sarah Frazier Former Content Manager
The Qatar government announced a new partnership with the American company Scale AI to provide training and AI-powered tools to improve and modernize government services during the next five years.
In a Rush? Here are the Quick Facts!
- Qatar partners with Scale AI to enhance government services using artificial intelligence.
- The five-year deal includes developing over 50 AI applications for Qatar’s public sector.
- This collaboration aims to position Qatar as a leader in AI technology in the region.
According to the p ublication shared by Scale AI , the alliance has been led by the Ministry of Communication and Innovation Technolgy (MCIT) as part of Qatar’s National Development Strategy and the country’s Digital Agenda 2030.
Yesterday we announced a strategic, long-term partnership with @MCITQatar to drive Qatar’s digital transformation: https://t.co/CUvbmwxwPM Together we will develop AI solutions that modernize government operations, enhance public services, and build a future-ready workforce. — Scale AI (@scale_AI) February 24, 2025
During the first stage, the organizations will analyze opportunities to provide AI-powered solutions to enhance public services and also train “a future-ready workforce.”
Scale AI—founded in 2016—explains that companies expect to optimize and automate processes such as legal regulatory transactions, enhanced healthcare administration services, and urban planning, and even provide a more personalized education for citizens or strengthen financial systems in the long term.
According to Reuters , Scale AI will provide the Qatar government with 50 AI-powered solutions for process optimizations during the next 5 years.
“(This deal) can be a blueprint for other governments around the world, and it allows us to really commit in a way that I think could drive impact even faster,” said Trevor Thompson, global head of growth at the San Francisco, California-based company in an interview with Reuters. The details of the agreement’s value were not disclosed.
Scale AI has provided AI solutions to other companies such as Microsoft, Wall Street bank Morgan Stanley, and AI startups like Cohere and OpenAI. The AI firm has also worked in the public sector with the U.S. government and Meta adapting Llama to help security teams in multiple tasks.
