Microsoft (MSFT) shares fell barely on Monday following an analyst report that the corporate canceled some U.S. information middle leases, probably signaling an oversupply of AI infrastructure.
On Friday, analysts at TD Cowen (TD) mentioned in a be aware that the tech large had canceled leases value “a few hundred megawatts,” or roughly two information facilities value of capability. In some circumstances, Microsoft mentioned “facility/energy delays” have been a motive for termination, analysts mentioned within the be aware, including that Meta (META) had beforehand used the same justification to cancel information middle leases.
TD Cowen additionally famous that Microsoft “has pulled again on” changing assertion of qualification, agreements that sometimes flip into conventional leases. The analysts expressed uncertainty about whether or not Microsoft’s actions characterize a short lived delay or a whole termination of the agreements.
The corporate is probably “in an oversupply place,” with the be aware including that Microsoft has turned down different information middle and land acquisition offers. The TD Cowen analysts wrote that this indicated “the lack of a serious demand sign that Microsoft was initially responding to and that we believed the shift of their urge for food for capability is tied to OpenAI.”
The corporate’s inventory was down by round 1.2% at midday and has fallen by greater than 4% thus far this 12 months.
“Because of the numerous investments now we have made up up to now, we’re nicely positioned to fulfill our present and growing buyer demand,” a Microsoft spokesperson mentioned in an announcement shared with Quartz. “Final 12 months alone, we added extra capability than any prior 12 months in historical past. Whereas we might strategically tempo or regulate our infrastructure in some areas, we’ll proceed to develop strongly in all areas. This enables us to speculate and allocate assets to progress areas for our future.”
The spokesperson added that Microsoft’s plan to spend greater than $80 billion on AI infrastructure thisfiscal 12 months remains to be on observe.
Final week, The Info reported that OpenAI has instructed traders that it expects the Stargate Venture — which it has partnered with SoftBank and Oracle (ORCL) on — to supply three-quarters of the computing energy it wants for its synthetic intelligence fashions by the tip of the last decade — a shift away from Microsoft.
Financial institution of America (BAC) analysts mentioned in a be aware on Monday that Microsoft is “strongly refuting” modifications to its information middle technique.
“They [Microsoft] make investments primarily based on a 10-year view on demand for cloud and AI demand,” the Financial institution of America analysts mentioned. “They tweak their forecasts up and down on this extra time on a regional foundation relying on which areas have to be prioritized.”
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