TD Cowen says Microsoft cancellation of data center leases part of Open AI shift

TD Cowen highlighted in a note on Friday that recent channel checks point to the cancellation of hyperscale data center leases at Microsoft (MSFT) that are specifically tied to supply chain and/or power delivery delays, which in turn is driving facility delivery delays relative to original ready for service dates. Conversely, recent channel checks also indicate that Microsoft is active in the data center market with incremental requirements in markets where it has existing availability zones, the analyst tells investors. Third-party hyperscale data center demand has increased year-over-year, which is supported by both the firm’s top-down demand pipeline and bottom-up hyperscale data center activity checks, says the analyst, who views the Microsoft pullback as part of the mix shift in incremental OpenAI workloads from Microsoft to Oracle (ORCL). In addition to Oracle seeing a material ramp in year-over-year demand, so are Alphabet (GOOG) (GOOGL) and Meta (META), while Amazon (AMZN) demand remains consistent year-over-year, the analyst tells investors in a note about the cloud hyperscalers.