Microsoft has pulled back on its ambitious plan to expand its datacentre presence by 2 gigawatts across the US and Europe. An analyst note from TD Cowen points to this shift as a sign of a cooling relationship with OpenAI. In just the past month, Microsoft canceled and deferred several datacentre lease agreements, walking away from over 2GW of capacity it had been in the process of leasing.
The analysts believe this move stems from Microsoft’s decision not to support additional training workloads for OpenAI. They see the lease cancellations as a response to a surplus of datacentre capacity compared to current demand forecasts. This approach gives Microsoft a more manageable timeframe to adjust its capacities for cloud services without overcommitting to unneeded expansions.
The situation follows a recent change in the exclusivity terms of an agreement between Microsoft and OpenAI regarding the Azure public cloud. A blog post from Microsoft in January revealed that OpenAI had made a significant commitment to Azure but with modifications that allow them to explore other options if Microsoft can’t meet its demands. OpenAI is now also allowed to build its own infrastructure for research and model training.
At the same time, OpenAI announced The Stargate Project, a $500 billion initiative aimed at expanding its infrastructure significantly over the next four years, with backing from companies like Softbank and Oracle. Microsoft is listed as a technology partner, but its lack of financial investment raises eyebrows amid growing concerns about its relationship with OpenAI.
Analysts note that leaders at OpenAI have expressed frustration over Microsoft’s slower pace in meeting datacentre needs. This tension appears to have driven Microsoft to reassess its leasing obligations in certain areas. Meanwhile, competitors like Google and Meta are quick to seize the opportunities that Microsoft is leaving behind. Reports indicate that Google is moving to fill the gaps left by Microsoft in international markets, while Meta is also expanding its own capacity in the US due to rising demand.
Computer Weekly reached out to Microsoft for comment but did not receive a response by the time of publication.
