Something's Gone Wrong With Microsoft's Huge AI Data Center Investments

Data centers are everywhere. As the world's tech companies demand more compute power to make their software run, the facilities have popped up in every corner of the planet. They makeup the backbone of global network servers, cloud computing, and of course, AI. Microsoft has been a major player in the global datacenter boom, but that may not last for long. The tech behemoth recently announced plans to scale back data center projects around the globe, in countries like the UK, Australia, and Indonesia. It's likewise pulled back on data center development in Illinois, North Dakota, and Wisconsin, according to […]

Apr 3, 2025 - 23:11

Something's Gone Wrong With Microsoft's Huge AI Data Center Investments

As the global economy crumbles into dust, Microsoft is reversing course on its spendy data center plans to fuel AI.

Data centers are everywhere. As the world's tech companies demand more computing power to make their software run, the facilities have popped up in every corner of the planet. They make up the backbone of global network servers, cloud computing — and of course AI.

Microsoft has been a major player in the global data center boom, but its ambitions may now be faltering, in a bellwether for the AI industry. The tech behemoth recently decided to scale back data center projects around the globe, in countries including the UK, Australia, and Indonesia. It's likewise pulled back on data center development in Illinois, North Dakota, and Wisconsin, according to Bloomberg.

That's on top of last week's news that Microsoft had walked away from two data center projects in the US and Europe, piling on to a February announcement that it was cancelling data center leases.

Microsoft's moves are a brisk 180 from the company's early-January plans to spend $80 billion on AI data centers in 2025. They come as the greater US economy crumbles in reaction to Donald Trump's so-called "reciprocal tariffs," which some analysts say are more akin to war-time economic sanctions.

"These are just sanctions, imposed to intimidate countries and companies into submission like they're universities or law firms," said David Dayen, executive editor of The Prospect. "They're what a mob boss would do."

Trump's tariffs are likely to have a hugely negative impact on the US tech sector more broadly, and on data centers specifically. Once these tariffs go into place, the prospect of building new data centers will become much more risky, as foreign-made resources skyrocket in price. Running existing facilities will likewise come at a premium, as renewable energy growth slows to a crawl and traditional energy costs soar.

That's not to mention the already shaky ground of AI development. In recent months, some investors have grown wary that an economic bubble was forming around the AI industry — a hypothesis that Microsoft's rollback would seem to support. The shaky CoreWeave IPO and nonexistent AI profits don't help.

It's all piling up into a record low day for tech stocks, especially whales like Microsoft, which hit a one-year low as soon as the gates opened on Wall Street this morning.

In all, the top seven US tech stocks — Microsoft, Tesla, Nvidia, Alphabet (Google), Apple, Meta, and Amazon — are poised to shed over $800 billion in market capacity today, a huge chunk of the $3 trillion in S&P 500 value erased in the 10 weeks since Trump took office.

We now sit on the precipice of a new economic era. How this all shakes out for companies like Microsoft will probably be a tale for the history books. When it comes to tech, one thing's for sure: the AI hype train is now screaming out of the station.

More on AI investments: Majority of AI Researchers Say Tech Industry Is Pouring Billions Into a Dead End

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