Microsoft has announced a slowdown or pause in certain artificial intelligence (AI) data center projects, including a $1Bn development in Ohio’s Licking County. Microsoft says it is reflecting its “strategic reassessment of its infrastructure needs” amid growing demands for AI computing power. However, the ongoing tariff-induced turmoil in the global markets, specially with respect to China, could well be a reason in a spending slowdown by not just Microsoft, but US big tech in general.
Especially in Ohio, Microsoft had initially planned to establish three data center sites. However, two of these sites will now be reserved for farmland, indicating a significant scale-back of the original project. Several reports suggest that this move has disappointed local officials, as the region had attracted interest from other tech giants like Google and Meta, and was also the planned location for Intel’s semiconductor plant, which has faced delays.
In fact, the Redmond-headquartered company has also paused later phases of a data center project in Wisconsin and scaled back both international expansions and US lease agreements.
“In recent years, demand for our cloud and AI services grew more than we could have ever anticipated and to meet this opportunity, we began executing the largest and most ambitious infrastructure scaling project in our history. By nature, any significant new endeavor at this size and scale requires agility and refinement as we learn and grow with our customers. What this means is that we are slowing or pausing some early-stage projects,” Noelle Walsh (President, Microsoft Cloud Operations) said in her post on LinkedIn.
Notably, over the past six months, the company has reportedly cancelled data center projects amounting to 2 gigawatts of electricity in the US and Europe due to an oversupply relative to its demand forecast. Interestingly, this includes not backing additional training workloads from OpenAI, which has contributed to investor concerns over heavy AI spending.
The development comes at a time when at the start of this year (2025), the software giant announced plans to allocate around $80 billion in the fiscal year 2025 towards expanding AI-enabled data centers globally, with more than half of this investment directed to projects within the United States.
It is important to note that the overall tech industry is experiencing shifts due to recent US tariffs. President Donald Trump’s newly imposed reciprocal tariffs include excessive duties on tech equipment imported from China (125%), Taiwan (32%), and South Korea (25%), as well as a 10% baseline tariff on all imports. This move clearly threatens infrastructure investments by companies like Oracle, Microsoft, Amazon, Alphabet (Google), and more. Even, it can affect mega AI infra projects like the $500 billion ‘Stargate’ initiative.
Meanwhile, in another move, the tech titan is reportedly considering a fresh round of job cuts (possibly as early as May 2025), mainly focusing on reducing middle management positions and increasing the ratio of engineers to managers.
