- Microsoft’s canceled data center leases lead to drops in AI and Bitcoin mining stocks.
- Microsoft rejected the Bitcoin investment proposal despite its growing corporate adoption trend.
The AI sector faces renewed turbulence amid concerns over Microsoft’s changing data center strategy.
Analysts at TD Cowen report that Microsoft has canceled over 2GW of planned data center leases across the U.S. and Europe in recent months, with further cancellations and deferrals in the past month.
This move seems tied to Microsoft’s decision to reduce support for additional OpenAI training workloads, hinting at a possible data center market oversupply.
The impact is already evident as AI chipmakers NVIDIA and Broadcom have dropped 5%, while AI server providers Dell and Super Micro fell 3% and 9%, respectively.
Remarking on the same, the analyst at TD Cowen, in conversation with Bloomberg, commented,
“As such, we believe the lease deferrals are intended to provide Microsoft with a medium-term runway of capacity in major markets to support cloud/inference workloads, with Microsoft canceling leases for capacity that exceeds its updated medium-term capacity needs.”
However, despite Microsoft’s pullback, Google is stepping in to fill the gap internationally, while Meta is absorbing capacity in the U.S.
The analyst further added,
“The ramp in demand from Google is driven by what we increasingly believe is a global capacity shortfall as its internal demand ramped amid its late August pullback from the market.”
Bitcoin mining stocks are not spared!
Bitcoin [BTC] mining stocks also took a hit, citing concerns over a potential oversupply.
Needless to say, the move triggered declines of 4% to 12% in shares of major crypto miners like Bitfarms, CleanSpark, Core Scientific, Hut 8, Marathon Digital, and Riot.
This followed Microsoft shareholders’ decision to reject a proposal to allocate company reserves to BTC.
What should the miners do?
That being said, JPMorgan previously observed that miners have struggled to remain profitable in the current environment.
The slowdown in AI data center investments could further impact their revenue streams.
With AI-driven demand becoming vital to miners’ business models, Microsoft’s decision to reduce data center expansion raises concerns. As market dynamics evolve, miners may need to adjust their strategies to adapt to the changing landscape.
