Microsoft is scaling back its global data centre expansion, marking a strategic shift in its infrastructure investments as it adapts to the evolving landscape of artificial intelligence (AI) and cloud services. According to Bloomberg, the tech giant has either delayed or pulled out of data centre projects across the UK, US, Australia, and Indonesia, raising questions about the long-term demand for AI workloads.
A Strategic Pause Amid AI Optimism
Microsoft, long seen as a leader in commercial AI thanks to its partnership with OpenAI, has been at the forefront of cloud infrastructure spending. However, its recent slowdown has cast doubt on the pace at which AI-driven demand will grow. Market watchers see the move as a recalibration rather than a retreat.
A company spokesperson confirmed the adjustments, stating, “We plan our data centre capacity needs years in advance to ensure we have sufficient infrastructure in the right places. As AI demand continues to grow… the changes we have made demonstrate the flexibility of our strategy.”
Delays and Withdrawals Across Key Regions
Key projects affected include a planned lease between London and Cambridge, abandoned negotiations near Chicago, and paused expansion efforts in Indonesia and North Dakota. Microsoft also slowed construction at a major campus in Mount Pleasant, Wisconsin.
In London’s Docklands area, a site previously linked with Microsoft’s AI plans is now open to other tenants, following Microsoft’s delayed commitment.
Applied Digital Corp., a company initially in talks with Microsoft for a North Dakota site, noted prolonged negotiations before pivoting to other potential clients.
Realigning Focus: From Expansion to Optimisation
Despite these pullbacks, Microsoft still intends to spend $80 billion on data centres in its current fiscal year. However, the focus is expected to shift in the next year, with priority given to outfitting existing infrastructure with AI and cloud-specific hardware.
This pivot follows industry signals suggesting that AI workloads may not require as many dedicated server farms as once thought. Emerging players like DeepSeek have showcased AI services built with reduced resources, challenging assumptions about the scale needed for competitive offerings.
In parallel, OpenAI’s evolving alliances—including possible infrastructure tie-ups with Oracle and SoftBank—may reduce Microsoft’s exclusivity as the default partner for AI hosting.
Market Reactions and Sector Outlook
Microsoft’s shares dropped 2.3% following the Bloomberg report, mirroring broader concerns in the tech sector. Nvidia and other chipmakers, which benefit directly from large-scale infrastructure investment, also saw market pressure.
Still, analysts remain cautiously optimistic. Ed Socia of datacenterHawk remarked that “Companies are reassessing their data centre strategies to optimise costs and prioritise efficiency.”
Also read: Maharashtra & Microsoft to Launch 3 AI Centres
CoreWeave CEO Michael Intrator added that the pullback may be “specific to Microsoft,” driven in part by shifting dynamics in its relationship with OpenAI.
Expansion Plans Continue—Just Differently
Microsoft insists its commitment to global infrastructure remains intact, citing active investments such as the $3.3 billion Wisconsin expansion and an upcoming cloud region in Indonesia, slated for launch in 2025.
The company’s re-evaluation underscores a broader trend: as the AI race matures, infrastructure decisions will hinge not just on scale, but on strategic partnerships, cost-efficiency, and evolving user needs.
This news was first reported by Livemint.
