Microsoft has announced a slowdown or pause in several of its data center construction projects, including a significant $1 billion initiative in Ohio. This decision suggests that the previously anticipated demand for artificial intelligence technology, which had fueled extensive infrastructure expansion, might not require as many high-powered computing resources as initially projected.
The tech giant has confirmed the suspension of early-stage developments on its land in Licking County, central Ohio, near Columbus. The company intends to designate two of the three sites it owns for agricultural use.
Noelle Walsh, president of Microsoft’s cloud operations, stated in a LinkedIn post that the demand for their cloud and AI services had exceeded expectations, prompting the execution of their largest and most ambitious infrastructure scaling project to date.
Walsh further explained that projects of this magnitude require flexibility and adjustments as the company learns and grows alongside its customers, resulting in the slowdown or pause of some early-stage endeavors.
While Microsoft did not specify which other projects are affected, it had previously announced a pause in the later phases of a major data center project in Wisconsin in late December.
Analysts at TD Cowen reported earlier in the year that Microsoft was also reducing its international data center expansion and terminating leases in the U.S. for data centers operated by other companies.
Some analysts have attributed these changes to a shift in the relationship between Microsoft and its business partner, OpenAI, the creator of ChatGPT.
Craig Ellis, director of research at B. Riley Securities, noted that OpenAI was prioritizing the development of more advanced AI systems, which demand significant computing resources, while Microsoft's strategic direction may have diverged.
On January 21, the two companies modified their agreement, allowing OpenAI to build its own computing capacity, primarily for research and model training. This announcement coincided with President Donald Trump's promotion of OpenAI's partnership with Oracle and SoftBank, which included a pledge of $500 billion in new AI infrastructure, starting with a data center in Texas.
Microsoft has consistently invested in data centers globally to support its cloud computing services. The rise of generative AI has further increased the need for these facilities, both for training new AI systems and for supporting the use of AI tools by millions of users.
The computing power needed for AI tools is costly and requires substantial electricity. President Trump cited AI needs as justification for bolstering the U.S. coal industry, despite its environmental impact. Tech companies have also explored nuclear power, including a Microsoft-backed proposal to revive the Three Mile Island plant in Pennsylvania, to supply electricity to data centers in Ohio and Virginia.
Microsoft maintains its plan to invest over $80 billion globally in AI infrastructure this fiscal year, ending in June, and has already doubled its data center capacity in the last three years.
Walsh affirmed that Microsoft will strategically pace its plans while continuing to grow and allocate investments aligned with business priorities and customer demand.
Despite Microsoft's assurances, the pause in Ohio was met with disappointment from local officials.
Licking County has also attracted data center investments from Google and Meta Platforms, as well as a semiconductor factory from Intel, although Intel has delayed the expected completion date for the project's first stage to 2030.