Microsoft reduces datacenter expansion plans across multiple geographies including Chicago and Jakarta.

Microsoft Corp. has pulled back on data center projects around the world, signaling a reassessment of its ambitious plans to build the server farms powering artificial intelligence and cloud services. The company has recently halted talks for, or delayed development of, sites in Indonesia, the UK, Australia, Illinois, North Dakota, and Wisconsin, according to people familiar with the situation. Microsoft acknowledged making changes to its data center plans but emphasized its flexibility. "We plan our data center capacity needs years in advance to ensure we have sufficient infrastructure in the right places," a spokesperson said. "As AI demand continues to grow, and our data center presence continues to expand, the changes we have made demonstrates the flexibility of our strategy."

The pullback has rippled across financial markets, reflecting investor concerns about the sustainability of Microsoft's massive capital outlays. Microsoft shares fell 2.3% to $373.32 at 10:34 a.m. in New York and were down about 9% for the year as of the Wednesday close. Chipmakers like Nvidia Corp., which consume a significant portion of data center budgets, have also felt the pressure. The uncertainty stems partly from difficulty determining whether the slowdown reflects expectations of diminished demand for AI services or merely temporary construction challenges such as power and building material shortages.

The company's retreat is evident across multiple projects with concrete details. Microsoft withdrew from negotiations to lease space between London and Cambridge in the UK at a site marketed for hosting advanced Nvidia chips and halted negotiations for data center space near Chicago. In Indonesia, Microsoft has paused work on parts of a data center campus it owns about an hour outside of Jakarta. At Mount Pleasant, Wisconsin, the company has put on hold some planned expansion at a site visited by then-President Joe Biden—a location where Microsoft spent $262 million on construction in the first six months of the project, with almost $40 million going to concrete alone. Meanwhile, Microsoft has backed away from a proposal to obtain additional cloud-computing capacity from CoreWeave Inc., which saw its shares fall more than 8%.

Analysts point to a broader pattern suggesting deliberate retrenchment rather than temporary delays. TD Cowen analysts wrote that Microsoft has abandoned new data center projects in the US and Europe amounting to a capacity of about 2 gigawatts of electricity, with the moves likely representing "data center oversupply relative to its current demand forecast." The concern has intensified since Chinese upstart DeepSeek announced in January that it created a competitive AI service using fewer resources than leading US companies. Microsoft has stated it remains committed to spending about $80 billion building out data centers in its fiscal year ending in June but indicated that the following fiscal year will see a slower rate of new infrastructure spending, with focus shifting from new construction to fitting out existing facilities with servers and equipment. The company maintains that its $3.3 billion Wisconsin project is on track to come online next year and that its planned Indonesia Central cloud region remains scheduled for the second quarter of 2025.