Analysts at TD Cowen revealed on Friday that Microsoft has canceled data center leases, causing ripples across the stock market. The announcement affected various stakeholders, including data center operator Applied Digital, whose shares plummeted by 13%. Microsoft's stock also experienced a downturn, falling by 1% on Monday and 1.9% the previous Friday. This decline contributed to the Dow Jones Industrial Average's sharpest sell-off of the year. In response, Microsoft acknowledged potential strategic adjustments to its infrastructure but reaffirmed its commitment to substantial investments in data centers.
Microsoft's fiscal year ends in June, and the company plans to allocate over $80 billion towards capital expenditures during this period. This decision was initially announced in early January as part of an ambitious plan to enhance data centers capable of handling artificial intelligence workloads. Despite recent lease cancellations with at least two private data center operators, Microsoft remains focused on this objective.
"Our plans to spend over $80B on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand." – A Microsoft spokesperson
The company's spokesperson emphasized that Microsoft is steadfast in its data center expansion efforts, leveraging its partnerships with CoreWeave and other providers for leasing data center capacity. The spokesperson also highlighted the significant investments made to date, positioning Microsoft to meet current and growing customer demand.
"Thanks to the significant investments we have made up to this point, we are well positioned to meet our current and increasing customer demand," – A Microsoft spokesperson
Microsoft's involvement in the $500 billion Stargate data center initiative, alongside Oracle and SoftBank, underscores its commitment to staying ahead in the data center arena. This initiative, announced last month, aligns with Microsoft's strategy to invest heavily in infrastructure to support its burgeoning AI ventures.
Shares of Digital Realty Trust, another data center company, saw a decline of 2.7%, while Vistra, a power supplier for data centers, experienced a near 5% drop. These movements reflect broader market reactions to Microsoft's infrastructure adjustments.