TMTPOST -- Amazon.com.Inc., followed suit after Microsoft Corporation decided to slow its pace of investments in artificial intelligence (AI) infrastructure.

Credit：Amazon

Wells Fargo analysts learned Amazon’s cloud computing business Amazon Web Services (AWS) has paused some commitments about new data center leases, according to a note released on Monday. “Over the weekend, we heard from several industry sources that AWS has paused a portion of its leasing discussions on the colocation side (particularly international ones),” Wells Fargo analysts wrote in the report.

The analysts noted  that “the position is similar to what we’ve heard recently from” Microsoft in that both companies are adjusting some new projects but not dropping signed deals.

Mcirosoft last week confirmed the tech giant is pausing some early-stage data center infrastructure projects on rural land it owns in central Ohio’s Licking County, and will reserve two of the threes sites for farmland.

“In recent years, demand for our cloud and AI services grew more than we could have ever anticipated and to meet this opportunity, we began executing the largest and most ambitious infrastructure scaling project in our history,” said Noelle Walsh, President at Microsoft Cloud Operations, in a post on LinkedIn. “By nature, any significant new endeavor at this size and scale requires agility and refinement as we learn and grow with our customers. What this means is that we are slowing or pausing some early-stage projects.”

While Microsfot may strategically pace its plans, it will continue to grow strongly and allocate investments that stay aligned with business priorities and customer demand, Walsh added.

Microsoft earlier this year was reported to pull back its data center projects, raising fears about the AI bubble. TD Cowen in February released a report that triggered fears on the sustainability of Microsoft’s mounting AI bills. Microsoft has canceled leases in the U.S> totaling “a couple of hundred” Megawatts (MW) of capacity with at least two private data center operators, Michael Elias and other TD Cowen analysts cited channel checks in a note on February 24. “When coupled with our prior channel checks, it points to a potential oversupply position for MSFT,” Elias said.

The analysts also stated Microsoft has pulled back on the conversion of SOQs, or statement of qualifications, to leases and re-allocated a considerable portion of its international spending to the U.S. SOQ is typically the precursor to signing a data center lease.

“While we have yet to get the level of color via our channel checks that we would like into why this is occurring, our initial reaction is that this is tied to Microsoft potentially being in an oversupply position,” the analysts wrote.

TD Cowen analysts late March updated their report, estimating Microsoft has withdrawn data center project totaling more than 2 gigawatts (GWs), or 2 billion watts, of capacity in half a year, based on their channel checks at Nvidia Corporation’s annual GTC conference and the industry event Data Connect in New York in March.

Given the lease cancellations and leases being terminated in both the U.S. and Europe that TD Cowen’s channel checks indicated, “Microsoft has both (1) walked away from +2GW of capacity in both the U.S. and Europe in the last six months that was in process to be leased, and (2) has both deferred and canceled existing data center leases in both the U.S. and Europe in the last month,” said these analysts in their note on March 26.

TD Cowen analysts believed the lease cancellations and deferrals of capacity points to data center oversupply relative to Microsoft’s current demand forecast, though the pullback of new capacity was largely driven by the decision to not support incremental Open AI training workloads. More pervasive lease cancellations or deferrals by Microsoft created an opportunity for both Google and Meta to backfill capacity, the analysts noted.  

Microsoft has scaled back on data center constructions around the world, from the U.S., United Kingdom, Australia to Indonesia, Bloomberg reported at the beginning of this month, signaling the software heavyweight is wary of too rapid expansion of its cloud computing infrastructure.

A Microsoft spokesperson told the publication that the company makes its plans of required data center capacity years in advance to ensure sufficient infrastructure in the right places. “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 spokesperson said.

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