Amazon and Microsoft Pause Data Center Expansion Amid AI Demand Uncertainty

AWS calls colo lease talks 'routine capacity management'

Hyperscaler says there's no decrease in demand, it's just looking for good deals Amazon has joined Microsoft in pausing some datacenter leasing deals, sparking fresh concerns about whether the AI hype train may be running out of steam. According to a note issued by financial services biz Wells Fargo, the ecommerce giant is taking a breather from some of its negotiations over leasing of colocation capacity for its Amazon Web Services (AWS) cloud division, particularly those involving international partners. The note states that AWS is not canceling already signed agreements, but merely pulling back from discussions over additional capacity in the pipeline. Amazon itself says there's nothing to see here - it's merely business as usual, but it follows soon after fellow hyperscaler Microsoft also started drawing back from leasing deals, having found itself "in an oversupply position," and there is growing unease over the global economic situation caused by the Trump administration's quixotic approach to trade. In a LinkedIn post in response to the news, AWS VP for Global Datacenters Kevin Miller wrote: "There continues to be significant interest and speculation about the datacenter expansion plans of AWS and other cloud providers." Miller claimed that there is no fall-off in demand for AI-related cloud services, and that the moves are simply a result of the retail giant's cloudy arm seeking the best deals to meet its capacity requirements. "First and foremost, we continue to see strong demand for both Generative AI and foundational workloads on AWS. We have almost two decades of experience delivering datacenter capacity to meet customer demands, when and where they need it. That experience has taught us to consider multiple solutions in parallel. Some options might end up costing too much, while others might not deliver when we need the capacity. Other times, we find that we need more capacity in one location and less in another. "This is routine capacity management, and there haven't been any recent fundamental changes in our expansion plans," Miller concluded. This was echoed by Vlad Galabov, Senior Research Director for Enterprise Infrastructure at Omdia, who told The Register that many investors do not understand the compute requirements for the current wave of AI expansion. "My take is - investors are clutching at straws to find a fault in the datacenter industry," Galabov said. "The fact is we need and will continue to need more compute. AI is one driver for this insatiable demand, but the continued transition towards a more and more digital global economy, and the slow ramp of specialized computing all require more compute power." "It is normal for hyperscale cloud service providers to right-size their colocation capacity, given that they also build their own datacenters. This has always happened," he added, chiding observers for examining every decision that is made with a fine-tooth comb, looking for signs that a supposed AI bubble is bursting. "I spoke to a lot of investors at the Omdia Analyst Summit at Datacenter World, and the commonality was they did not understand the profound need for computing until we went deep into the computing requirements of both AI training and inference," Galabov said. However, Fabrice Coquio, SVP of global colocation biz Digital Realty had a slightly different take, saying there could be an AI bubble precisely because investors don't understand it. "Is there a bubble? Potentially? I see the risk, because when some of the traditional investments in real estate - like housing, logistics, and so on - are not that important, people are looking to invest their amazing capacity of available funds in new segments, and they say, 'Oh, why not datacenters?'" he said in an interview with The Register recently. "In the UK, in France, in Germany, you've got people coming from nowhere having no experiences ... that have no idea about what AI and datacenters are really and still investing in them," he added. At the moment, about 20 organizations represent roughly 60 percent of capacity bookings around the world, Coquio said. "Most of them have completed their time to market initiative to be in multiple areas where they needed multiple subcontractors for colocation services. They are now engaged for many years already in reducing the number of partners, either because they build more and more themselves, or when they need absolutely a collaboration provider, providing connectivity, concentration of customers and so on, they reduce that to the bare minimum," he told us. So it isn't a sign of the AI bubble popping just yet, though we note the growing unease in the markets at the Trump administration's trade policies, and that investment in AI bit barn capacity continues to heavily outweigh the amount enterprise customers are spending on AI software licenses. ®

Amazon has halted some data center leasing talks, Wells Fargo analysts say

April 21 (Reuters) - Amazon.com (AMZN.O), opens new tab has paused some data center lease talks for its cloud division, particularly in overseas markets, suggesting a short-term slowdown in leasing for large-scale facilities, Wells Fargo analysts said on Monday. The move by the largest U.S. cloud company is the latest sign that rising economic uncertainty could be forcing companies to rethink how they spend the billions of dollars they have earmarked for AI infrastructure including pricey Nvidia chips. Wells Fargo analysts said the magnitude of Amazon's pause was unclear, but it was similar to Microsoft's recent pullback. Rather than canceling any signed deals, Amazon is "digesting aggressive recent lease-up deals," the analysts said. "It does appear like the hyperscalers (big cloud companies) are being more discerning with leasing large clusters of power, and tightening up pre-lease windows for capacity that (would) be delivered before the end of 2026," they said in a note, adding that the likes of Meta (META.O), opens new tab, Alphabet-owned (GOOGL.O), opens new tab Google and Oracle (ORCL.N), opens new tab remain active in leasing. Amazon downplayed the note. "This is routine capacity management, and there haven't been any recent fundamental changes in our expansion plans," said Kevin Miller, vice president of Amazon Web Services Global Data Centers in a post on LinkedIn. Rival Microsoft abandoned data center projects set to use 2 gigawatts of electricity in the U.S. and Europe in the last six months due to an oversupply relative to its current demand forecast, TD Cowen analysts had said in March. Investor skepticism about the hefty artificial intelligence spending by U.S. tech firms has increased due to slow payoffs and the rise of Chinese startup DeepSeek, which showcased AI technology at a much lower cost than its Western rivals. Like rivals, Amazon is investing heavily in generative AI, including releasing a variety of chatbots serving sellers, businesses and consumers. CEO Andy Jassy justified its billions of dollars in outlays for artificial intelligence development earlier this month, saying the investment was necessary to remain competitive. Reporting by Juby Babu in Mexico City; Editing by Shailesh Kuber Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Amazon Follows Microsoft in Retreat From Ambitious AI Data Center Plans

Two banks say Amazon has paused negotiations on some international data centers. The number of tech giants paring back on their AI data center plans rises to two. According to banks Wells Fargo and TD Cowen, Amazon has paused negotiations on some co-location data center deals, primarily in Europe. The news comes shortly after several reports have indicated Microsoft has paused or cancelled some of its plans. "It's not clear the magnitude of the pause," a Wells Fargo report reads, "but the positioning is similar to what we've recently heard from MSFTâ€"they are digesting aggressive recent lease-up deals." It goes on to emphasize that Microsoft still appears to be going through with deals already signed. Co-location is the concept of sharing enormous infrastructure costs by building data in partnership with other companies that need it. It is important to keep in mind that other companies, including Meta and xAI, continue to aggressively build out data centers to fuel their AI models. Building out large-scale data centers requires significant amounts of power, which grids have struggled to satisfy, and Amazon may need more time to open data centers already under construction. The Wells Fargo report states that the e-commerce giant already has 9 GWs (gigawatts) of active power capacity in its existing data center infrastructure. But the news further supports some concern that demand for AI infrastructure is cooling as businesses still struggle to find ways to actually use the new technology to save time and money. It does not help that President Trump's ongoing trade war is causing stocks to tumble. Amazon is down 24% this year, and the company is exposed to tariffs on China, as estimates suggest more than 70% of goods on its namesake marketplace come from China. There is concern amongst economists that the trade war and potential recession could slow down the AI boom as major players, including Nvidia, are caught in the crossfire. That company receives a substantial amount of its business from China and is under scrutiny for potentially turning a blind eye to high-end chips evading sanctions and landing in China. If Amazon cuts back investment on new data centers, that could further hurt Nvidia's sales of chips. Amazon reports its next earnings on May 1st, and there will be close eyes on how AI demand is looking. Microsoft recently pulled back on an ambitious $1 billion data center project in Ohio, surprising officials there who offered the company generous tax incentives to snag the deal despite concerns that it would employ very few people and require immense energy and water resources. CEO Satya Nadella has tried to tame expectations regarding the AI revolution, saying in an interview that the technology has not yet turned into a meaningful lift for the U.S. economy, though his company has reiterated plans to spend $80 billion on infrastructure in the next few years. If there is any silver lining, it is that locals will not have to pay as much in taxes to support these upgrades that have been cancelled. On the flip side, they do employ a lot of construction workers for initial rollout, and there has been some hope that the demands of data centers would finally push local municipalities to upgrade fraying infrastructure and build out clean energy. There was a sliver of hope that AI would provide something of immediate practical value, if not chatbots that still get things wrong all the time or Palantir-based police state systems.

Amazon has halted some data centre leasing talks

Amazon has paused some data centre lease talks for its cloud division, especially overseas, signalling a short-term slowdown in large-scale facility leasing as economic uncertainty rises. This mirrors Microsoft's recent pullback, with both firms reassessing aggressive expansion while rivals like Meta and Google remain active.Amazon.com has paused some data centre lease talks for its cloud division, particularly in overseas markets, suggesting a short-term slowdown in leasing for large-scale facilities, Wells Fargo analysts said on Monday. The move by the largest US cloud company is the latest sign that rising economic uncertainty could be forcing companies to rethink how they spend the billions of dollars they have earmarked for AI infrastructure including pricey Nvidia chips. Wells Fargo analysts said the magnitude of Amazon's pause was unclear, but it was similar to Microsoft's recent pullback. Rather than canceling any signed deals, Amazon is "digesting aggressive recent lease-up deals," the analysts said. "It does appear like the hyperscalers (big cloud companies) are being more discerning with leasing large clusters of power, and tightening up pre-lease windows for capacity that (would) be delivered before the end of 2026," they said in a note, adding that the likes of Meta, Alphabet-owned Google and Oracle remain active in leasing. Amazon downplayed the note. "This is routine capacity management, and there haven't been any recent fundamental changes in our expansion plans," said Kevin Miller, vice president of Amazon Web Services Global Data centres in a post on LinkedIn. Rival Microsoft abandoned data centre projects set to use 2 gigawatts of electricity in the US and Europe in the last six months due to an oversupply relative to its current demand forecast, TD Cowen analysts had said in March. Investor skepticism about the hefty artificial intelligence spending by US tech firms has increased due to slow payoffs and the rise of Chinese startup DeepSeek, which showcased AI technology at a much lower cost than its Western rivals. Like rivals, Amazon is investing heavily in generative AI, including releasing a variety of chatbots serving sellers, businesses and consumers. CEO Andy Jassy justified its billions of dollars in outlays for artificial intelligence development earlier this month, saying the investment was necessary to remain competitive.

AWS, Microsoft Slow Down Data Center Deployments | PYMNTS.com

Several industry sources told Wells Fargo's analysts team that AWS has "paused a portion of its leading discussions" on colocated data centers, particularly those abroad. "It's not clear the magnitude of the pause, but the positioning is similar to what we've heard recently from Microsoft," wrote Wells Fargo analyst Eric Luebchow in the Monday (April 21) note. Last week, Noelle Walsh, president of Microsoft Cloud Operations and Innovation, disclosed in a LinkedIn post that the software giant is "slowing or pausing some early-stage projects" as it refines the buildout of cloud capacity relative to customer demand. Microsoft has doubled its data center capacity in the last three years and is on track to spend the budgeted amount of $80 billion or more in 2025 "informed by near-term and long-term demand signals," Walsh said in the post. Microsoft has more than 350 data centers in at least 60 regions globally. Meanwhile, Kevin Miller, vice president of global data centers at AWS, explained in a LinkedIn post that the change in the hyperscaler's data center plans is "routine capacity management, and there haven't been any recent fundamental changes in our expansion plans." AWS continues to see "strong demand for both generative AI and foundational workloads," he said in the post. Wells Fargo's Luebchow acknowledged that "it's not clear yet" that AWS' slowing of lease signing "is an area of concern or just the natural ebbs and flows of hyperscale activity." AWS has 114 availability zones and plans for 12 more in 36 global regions that serve 245 countries and territories. An AWS spokesperson told PYMNTS that availability zones refer to a cluster of one or more discrete data centers. AWS does not disclose its actual data center count. The surge in data center construction is the result of explosive growth in AI, cloud services and digital infrastructure needs. The demand for AI tools like ChatGPT is driving a need for massive computing power and storage, which means the necessity for more data centers. Global data center capacity is expected to grow at 15% per year until 2027, which is forecast to be insufficient to meet growing demand, according to real estate services company JLL. Driven by AI advancements, "global data center construction currently stands at record levels," JLL said in its 2025 Global Data Center Outlook. "All signals suggest that AI demand will continue to build momentum in 2025." However, the experience of China is a cautionary tale. After ChatGPT burst onto the scene in November 2022, there was a rush of data center buildout in China as growing demand for AI made the country seem like a sound bet, MIT Technology Review reported in March. In 2023 and 2024, more than 500 new data center projects were announced in China. At least 150 were operational by the end of last year, per the report. But the rise of DeepSeek, which offered a more economical way to train and use AI models, along with faltering economics around AI, is putting a crimp on the industry, according to the report. Many data centers also were constructed hastily and did not meet industry standards. The result is that most of the companies running these data centers are "struggling to stay afloat," the report said.

Amazon paused some talks over data center leasing, Wells Fargo says By Investing.com

Investing.com-- Amazon.com (NASDAQ:AMZN) has paused some talks to lease data center capacity for its Web Division, pointing to some slowdown in demand among major artificial intelligence spenders, Wells Fargo (NYSE:WFC) said in a Monday note. The investment bank said that Amazon Web Services (AWS) had paused a portion of its leasing discussion for data center capacity, particularly in international markets, although it was not clear just what the magnitude of the pause was. The news on AWS comes just a week after Microsoft- another major AI spender- said it was slowing down its pace of building more data center capacity, sparking fears that there was a supply glut in the AI-linked sector. Wells Fargo noted that AWS and Microsoft (NASDAQ:MSFT) were the two largest AI "hyperscalers" in the market, and that this trend pointed to some moderation in data center demand. "It's not clear yet whether AWS slowing some leases is an area of concern, of just the natural ebbs and flows of hyperscale activity," Wells Fargo analysts said in a note. But they also noted that even though AWS and Microsoft were slowing data center investment, other major hyperscalers- Meta (NASDAQ:META), Google (NASDAQ:GOOGL), and Oracle- all remained active, while plans for an aggressive data center buildout under OpenAI and Softbank's Project Stargate remained in play. Still, any slowing in server investment by Wall Street's AI hyperscalers points to softer demand for AI chips and server makers such as Nvidia (NASDAQ:NVDA). Amazon had earlier this year signaled that it could spend more than $100 billion on AI infrastructure in 2025.