Microsoft’s Data Center Pullback Raises Questions About AI Infrastructure Boom

Is the tide receding on the AI data center tsunami? 

Microsoft has pulled back on a number of its data center projects in the past several weeks, with its most recent pause being an early-stage project in Ohio worth $1 billion. That move broadens the impact of the company’s decision to halt work on sites in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin.

“Any significant new endeavor at this size and scale requires agility and refinement as we learn and grow with our customers,” Noelle Walsh, president of Microsoft’s cloud computing operations, said in a post on LinkedIn last week. 

Microsoft’s moves may be reflective of broader economic uncertainty, said Trevor Morgan, chief operating officer at OpenDrives. “We have a lot of uncertainty going on in the global economy,” Morgan said. “Volatility makes people stop and go, ‘Wait a minute here with capital investments – let’s think that through.’” 

The current economic chaos isn’t the only reason Microsoft may be pulling back, Morgan said. After years of the industry going all-in on AI, the question of when tech firms will see a return on their eye-popping investments still hangs in the balance: 

• “Do we really know what AI is going to do for businesses?” Morgan said. “People are freaked out. And with uncertainty comes cautiousness with capital-heavy investments.” 
• And ironing out how AI fits into different industries isn’t something that’ll happen overnight. “I think we’re going to see that iron out in the next two to three years,” Morgan said. 

Though caution may be causing the industry to slow its roll, it’s unlikely that these firms will reverse course entirely, he said. As it stands, Microsoft and others are likely slowing down to take a pulse check and assess competition. “If everybody’s looking at each other, then it looks like a receding, but I think it’s just a pause,” he said. 

So what will it take to melt the ice? It may require one firm going “full speed ahead” despite the circumstances, said Morgan. It’s a mentality that tech giants like Google and Amazon seem to be living by, as both companies reaffirmed their multi-billion dollar data center plans last week. 

“One of them is going to say, ‘damn the torpedoes,’” said Morgan. “You hear all the time that you don’t go big in business when times are good, because everything’s expensive. You go big when things look a little rough.”