Table of Contents
- 1. News
- 2. There Were Signs
- 3. Potential Implications
- 4. Other Potential Sources of the News
- 5. What do I think is Actually Happening?
1. News
Microsoft is reportedly cancelling some U.S. data center leases and slowing down the execution of others. Altogether, these projects would have represented a few hundred megawatts in total power if completed. The news has led many to think the GenAI hardware boom is finally peaking. While that’s possible, I think honing in on which pieces of the hardware stack this involves and why this news is coming today is quite important… so let’s do it.
2. There Were Signs
On the last call, the company had already spoken about shifting CapEx from long-lived assets like data centers to short-lived assets like chips. They've been "short on power & space" over the last few years & have aggressively tried to address this. Here's what they said about resolving this supply bottleneck on the last call:
"We have been short on power and space. As you see those investments land that we've made over the past 3 years, we get closer to that balance by the end of this year."
CFO Amy Hood last earnings
The end of Microsoft’s fiscal year is in June.