Data Centers: Is the Hype Coming to an End?

Data centers appear to be sprouting up almost overnight. Yet investment bank TD Cowen points out that Microsoft – one of the major hyperscalers – has recently canceled or postponed data center leasing contracts. Does this signal the end of the data center boom?

Much of the up to 436 billion euros in investments announced by OpenAI and U.S. President Donald Trump for the Stargate project upon his return to office is slated to flow into AI data centers.

However, Microsoft – as one of the leading hyperscalers – has recently canceled or deferred leasing agreements for data center facilities with a combined capacity of several hundred megawatts. Computerwoche reports this. Experts are already speculating whether the data center hype of recent years may be coming to a close.

More U.S.-focused than international data center business

These speculations stem from a Forexlive article based on a February 21, 2025 report by investment bank TD Cowen. According to the report, Microsoft – potentially reacting to the low costs of China’s GenAI startup DeepSeek – has terminated leasing agreements with at least two private data center operators. The affected capacity reportedly amounts to several hundred megawatts.

TD Cowen’s “channel checks” revealed, among other things, that Microsoft has temporarily or permanently scaled back its Statements of Qualifications (SOQs) – documents certifying operator eligibility – for converting leases into long-term commitments. Moreover, TD sources have found indications that Microsoft is scaling back its international data center spending and shifting investment focus toward the United States – a move analysts interpret as a possible sign of oversupply.

Building owned rather than leased data centers

Nonetheless, Microsoft intends to stick to its plan to invest more than 70 billion euros in data center infrastructure – half of it domestically in the U.S. Experts suspect the company will increasingly prioritize building its own facilities going forward. It may also concentrate its core investment efforts on AI-specific data centers and the associated power supply infrastructure.

The software giant, like other hyperscalers, publicly explored constructing nuclear power plants in 2024. Yet this theory remains controversial among analysts. Gartner considers much of it still speculative. Microsoft has not yet issued a definitive statement on its investment plans – and has explicitly denied reports about a potential shift in its data center strategy.

Hyperscale business remains the ‘big thing’

The U.S. market research firm expects hyperscalers like Microsoft to continue balancing supply and demand – but also to keep investing billions in data centers. Expansion of cloud and AI data centers will therefore persist. The Stargate project, jointly launched by OpenAI, Oracle, and SoftBank, will certainly provide further momentum. On the other hand, Microsoft’s partial pullback could also reflect the migration of OpenAI workloads to Oracle and SoftBank, Computerwoche notes.

Meanwhile, TD Cowen observes growing third-party demand for hyperscaler data center capacity – particularly from Meta (Facebook’s parent company), Oracle, and Google. Overall, the investment bank forecasts AI-driven growth in demand across the hyperscale sector – including Microsoft Azure. So talk of an end to the data center hype is premature.

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