Microsoft Doubles Down on $80B Data Center Spending Plan Amidst Volatility

Microsoft has reaffirmed its commitment to investing over $80 billion in capital expenditures this fiscal year, despite recent reports suggesting a slowdown in data center expansion. The company addressed concerns raised by analysts at TD Cowen who claimed Microsoft had canceled leases with private data center operators based on "channel checks."

Microsoft's Response

A Microsoft spokesperson stated in an emailed statement that the company's plans to spend over $80 billion on infrastructure remain on track, emphasizing their commitment to meeting customer demand amid record growth. "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," the spokesperson said.

Background and Context

Earlier this year, Microsoft announced its ambitious target of investing more than $80 billion in data centers capable of handling artificial intelligence workloads during the current fiscal year, which concludes in June. This investment reflects the company's strategic focus on expanding its cloud computing infrastructure and supporting the growing demand for AI-powered services.

Microsoft is actively involved in various initiatives related to data centers and AI. In addition to building its own data centers and leasing capacity through providers like CoreWeave, Microsoft is a major backer of OpenAI and participates in the $500 billion Stargate data center initiative alongside Oracle and SoftBank.

Market Impact

News regarding potential changes in Microsoft's data center expansion plans led to volatility in the market. Shares of Microsoft fell 1.9% on Friday, contributing to the Dow Jones Industrial Average's sharpest sell-off of the year. Data center-related companies also experienced declines, with Digital Realty Trust down 2.7%, Vistra down almost 5%, and Applied Digital down 13%.

Microsoft's Future Plans

While acknowledging that it may "strategically pace or adjust our infrastructure in some areas," Microsoft emphasized its continued commitment to growth across all regions. The company aims to allocate resources to emerging areas and invest in future developments. "Thanks to the significant investments we have made up to this point, we are well positioned to meet our current and increasing customer demand," the spokesperson wrote. "Last year alone, we added more capacity than any prior year in history."