Microsoft’s stock slipped Monday after an analyst note said it was canceling some US data center leases.
The TD Cowen analysts said the pullback may indicate Microsoft is in a “potential oversupply position.”
Microsoft told BI it “may strategically pace or adjust our infrastructure in some areas” and will “continue to grow strongly.”
Microsoft’s stock slid slightly on Monday morning after an analyst note said that the company has canceled leases for some of its US data centers, suggesting AI demand might be lower than the company expected.
In a Friday note that generated discussion online over the weekend, analysts at TD Cowen published takeaways from their recent channel checks, which often seek out information from a company’s supply chain and distribution channels.
“Our channel checks indicate that MSFT has 1) cancelled leases in the US totaling ‘a couple of hundred MWs’ with at least two private data center operators, 2) has pulled back on the conversion of SOQ’s to leases, and 3) has re-allocated a considerable portion of its international spend to the US,” the analyst note said, referring to megawatts and statements of qualifications, which often precede lease signings and which data center operators frequently take as a green light on data center construction.
“When coupled with our prior channel checks, it points to a potential oversupply position for MSFT,” the analysts wrote. In some cases, Microsoft is “using facility/power delays as a justification for the termination,” they added.
The analysts said it was unclear if the conversion of SOQs to leases was simply delayed or if they were outright terminated. Lastly, the analysts said the reallocated international spending suggests “a material slowdown in international leasing.”
Taken together, their observations at the moment suggest to the analysts that Microsoft “may have excess data center capacity relative to its new forecast.”
Microsoft’s stock was down around 2% in Monday morning trading.
In another note published Monday, the TD Cowen analysts said they believe Microsoft’s actions are “related to a shift in incremental OpenAI workloads to Oracle/Softbank as we have seen a material ramp in Oracle requirements in the last three months, at a scale we have not seen from Oracle prior.”
President Trump last month announced Stargate, a new joint venture between OpenAI, Oracle, and SoftBank expected to invest up to $500 billion in AI infrastructure in the US.
