Microsoft Scales Back AI Data Center Projects Amid Shifting Demand and Industry Dynamics

Microsoft's Huge Plans for Mass AI Data Centers Now Rapidly Falling Apart

In yet another sign that tech giant Microsoft is getting cold feet about overinvesting in AI infrastructure, the company has abruptly paused work on data centers in Ohio. As Bloomberg reports, the decision came to the surprise of officials who had agreed to develop a site near the city of Heath just two months prior. In late March, Microsoft told them it would be stopping the project, in addition to two other halted site developments in two nearby cities in the state. One of the projects outside of Columbus was valued at $1 billion, according to CBS News. It's the latest indication that Microsoft is looking to pull back as the AI industry continues to pour billions into building out infrastructure. Earlier this month, Bloomberg found that the software company had halted and delayed the development of data centers in Indonesia, the UK, Australia, Illinois, North Dakota, and Wisconsin. Investment bank TD Cowen also told the publication in February that Microsoft had canceled some leases for US data center power capacity, totaling a "couple of hundred megawatts." While Microsoft's exact reasoning for the scaling back remains unclear, waning demand and fears of a growing AI bubble are easy culprits. Case in point, Microsoft CEO Satya Nadella admitted during a podcast appearance in February that generative AI simply hasn't generated much value so far, hinting at the possibility that the supply side could be vastly outstripping demand for the tech. Meanwhile, Microsoft's competitors at OpenAI, Meta, and Google continue to pour tens of billions of dollars into AI data center infrastructure projects. In Microsoft's case, there may be another explanation, as Bloomberg points out: the move could be tied to changes in its relationship with partner OpenAI. In February, Microsoft allowed OpenAI to buy computing from rival cloud services, news that coincided with Trump's announcement of a $500 billion joint venture to build cloud computing data centers dubbed Stargate. "OpenAI was moving in one direction" by prioritizing advanced and hardware-intensive AI systems, while "Microsoft may not have been moving in that same direction," B. Riley Securities director of research Craig Ellis told CBS. Microsoft could also simply be readjusting its approach to building out infrastructure. "Datacenter planning is a multi-year and capital-intensive program we plan for years in advance to ensure we have sufficient infrastructure in the right places," Microsoft cloud operations president Noelle Walsh suggested in a LinkedIn post earlier this month. "By nature, any significant new endeavor at this size and scale requires agility and refinement as we learn and grow with our customers," she added. "What this means is that we are slowing or pausing some early-stage projects." Microsoft is still committed to spending a whopping $80 billion globally to expand its AI infrastructure this year. "While we may strategically pace our plans, we will continue to grow strongly and allocate investments that stay aligned with business priorities and customer demand," Walsh wrote. Meanwhile, Heath mayor Mark Johns told Bloomberg that he hasn't given up on Microsoft living up to its promises to invest in the area. "They have not given any indication that these projects are dead and gone," he said. "What they've told us is they're basically paused."

Microsoft says it's 'slowing or pausing' some AI data center projects, including $1B plan for Ohio

Microsoft said it is "slowing or pausing" some of its data center construction, including a $1 billion project in Ohio, the latest sign that the demand for artificial intelligence technology that drove a massive infrastructure expansion might not need quite as many powerful computers as expected. The tech giant confirmed this week that it is halting early-stage projects on rural land it owns in central Ohio's Licking County, outside of Columbus, and will reserve two of the three 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, the president of Microsoft's cloud computing operations, in a post on LinkedIn. Walsh said "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." Microsoft didn't say Wednesday what other projects it has slowed outside of Ohio, but in late December it revealed it was pausing the later phases of a large data center project in Wisconsin. Analysts with TD Cowen reported earlier this year that Microsoft was also scaling back some of its international data center expansion and canceling some leases in the U.S. for use of data centers operated by other companies. Other analysts for months have tied some of the changes to a shift in Microsoft's close relationship with its business partner OpenAI, maker of ChatGPT. "OpenAI was moving in one direction" by prioritizing the development of more advanced AI systems, which require vast computing resources to train on troves of data, while "Microsoft may not have been moving that same direction," said Craig Ellis, director of research at B. Riley Securities. The two companies announced on Jan. 21 that they were altering the agreement that had made Microsoft the exclusive provider of OpenAI's computing power, enabling the smaller company to build its own capacity, "primarily for research and training of models." It was the same day that newly inaugurated President Donald Trump touted OpenAI's partnership with Oracle and SoftBank to pledge $500 billion in new AI infrastructure in the U.S., starting with a data center in Texas. Microsoft has long built data centers around the world to run its cloud computing services. The generative AI boom accelerated the demand for such facilities, both to train new AI systems and to keep them running as millions of people start using chatbots and other AI tools at work and home. The computing it takes to run AI tools is expensive and requires a large amount of electricity -- so much so that Trump this week cited AI needs as part of the justification for using his emergency authorities to boost the declining U.S. coal industry, a reliable but polluting energy source. Tech companies have also sought to tap into nuclear power, including a proposed Microsoft-backed revival of the shuttered Three Mile Island plant in Pennsylvania, which would feed an electricity grid supplying data centers in Ohio as well as Virginia, the nation's biggest data center hub. Microsoft said it still plans to spend more than $80 billion globally to expand its AI infrastructure this fiscal year, which ends in June, and has already doubled its data center capacity over the past three years. "While we may strategically pace our plans, we will continue to grow strongly and allocate investments that stay aligned with business priorities and customer demand," Walsh said. The Ohio pause nevertheless came as a disappointment to local officials. Licking County has also attracted data center investments from Microsoft rivals Google and Meta Platforms and a highly anticipated semiconductor factory from Intel, though the struggling chipmaker in February pushed back the expected completion date for the project's first stage to 2030. © 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Microsoft says it's 'slowing or pausing' some AI data center projects, including $1B plan for Ohio

Microsoft said it is "slowing or pausing" some of its data center construction, including a $1 billion project in Ohio, the latest sign that the demand for artificial intelligence technology that drove a massive infrastructure expansion might not need quite as many powerful computers as expected. The tech giant confirmed this week that it is halting early-stage projects on rural land it owns in central Ohio's Licking County, outside of Columbus, and will reserve two of the three 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, the president of Microsoft's cloud computing operations, in a post on LinkedIn. Walsh said, "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." Microsoft didn't say on Wednesday what other projects it has slowed outside of Ohio, but in late December, it revealed it was pausing the later phases of a large data center project in Wisconsin. Analysts with TD Cowen reported earlier this year that Microsoft was also scaling back some of its international data center expansion and canceling some leases in the U.S. for use of data centers operated by other companies. Other analysts for months have tied some of the changes to a shift in Microsoft's close relationship with its business partner OpenAI, maker of ChatGPT. "OpenAI was moving in one direction" by prioritizing the development of more advanced AI systems, which require vast computing resources to train on troves of data, while "Microsoft may not have been moving in that same direction," said Craig Ellis, director of research at B. Riley Securities. The two companies announced on Jan. 21 that they were altering the agreement that had made Microsoft the exclusive provider of OpenAI's computing power, enabling the smaller company to build its capacity, "primarily for research and training of models." It was the same day that newly inaugurated President Donald Trump touted OpenAI's partnership with Oracle and SoftBank to pledge $500 billion in new AI infrastructure in the U.S., starting with a data center in Texas. Microsoft has long built data centers around the world to run its cloud computing services. The generative AI boom accelerated the demand for such facilities, both to train new AI systems and to keep them running as millions of people start using chatbots and other AI tools at work and home. The computing it takes to run AI tools is expensive and requires a large amount of electricity, so much so that Trump this week cited AI needs as part of the justification for using his emergency authorities to boost the declining U.S. coal industry, a reliable but polluting energy source. Tech companies have also sought to tap into nuclear power, including a proposed Microsoft-backed revival of the shuttered Three Mile Island plant in Pennsylvania, which would feed an electricity grid supplying data centers in Ohio as well as Virginia, the nation's biggest data center hub. Microsoft said it still plans to spend more than $80 billion globally to expand its AI infrastructure this fiscal year, which ends in June, and has already doubled its data center capacity over the past three years. "While we may strategically pace our plans, we will continue to grow strongly and allocate investments that stay aligned with business priorities and customer demand," Walsh said. The Ohio pause, nevertheless, came as a disappointment to local officials. Licking County has also attracted data center investments from Microsoft rivals Google and Meta Platforms and a highly anticipated semiconductor factory from Intel, though the struggling chipmaker in February pushed back the expected completion date for the project's first stage to 2030.

Microsoft 'slowing or pausing' some AI data center projects

Microsoft said on Wednesday it is "slowing or pausing" some of its data center projects, describing the move as a show of flexibility as the artificial intelligence (AI) industry evolves. "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," Noelle Walsh, president of Microsoft cloud computing operations, wrote in a Wednesday 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," she said. The announcement comes as AI companies pour unprecedented amounts into infrastructure to meet the computational and energy demands of the emerging technology. Microsoft is still on track to spend over $80 billion on infrastructure, a company spokesperson confirmed. Still, the company has revealed changes to a variety of its data center plans, including the halt of projects in central Ohio's Licking County. A Microsoft spokesperson told The Hill these projects were halted "after careful consideration" and that two of the three sites will be used for farming. And last December, the company announced it paused a large data center project in Wisconsin as it entered the later phases. "We plan our datacenter capacity needs years in advance to ensure we have sufficient infrastructure in the right places," the spokesperson told The Hill. "As AI demand continues to grow, and our datacenter presence continues to expand, the changes we have made demonstrates the flexibility of our strategy." The Trump administration has pushed for more data center development to assist in the acceleration of AI technology. These centers house rows of servers that provide the processing capacity for machine learning, cloud storage and AI systems. Last week, the administration identified 16 sites for data centers on land owned by the Department of Energy, with Secretary Chris Wright describing the "global race for AI dominance" as the "next Manhattan project." The department said it hopes operations at the center could begin by the end of 2027. During his first week at the White House in January, President Trump announced a private sector investment of up to $500 billion to build AI infrastructure.