Microsoft puts $1B US datacenter builds on hold amid AI, tariff uncertainty
Committed $80B capex for DCs as recently as January. We wonder what changed?
World War Fee Microsoft has called a halt to the construction of three datacenter campuses in central Ohio, in a sign the tech giant is having to reappraise its infrastructure requirements amid uncertain economic circumstances and weaker-than-expected AI demand.
The Windows maker confirmed it put on hold $1 billion plans for three bit barn sites in Licking County – at New Albany, Heath and Hebron – citing a strategic investment review for the decision, telling The Register it will "not be moving forward at this time with our plans to build datacenters at the Licking County sites. We will continue to evaluate these sites in line with our investment strategy."
Microsoft had committed to spending $80 billion on expanding its AI-enabled datacenters around the world as recently as January.
It is understood that the Redmond megacorp is not selling off the land earmarked for the datacenters, suggesting it may intend to proceed with the projects at some point in future.
"We sincerely appreciate the leadership and partnership of Ohio government officials and the support of Licking County residents. We are taking the appropriate steps to ensure the land at two of our sites can be used for farming and are following through with our development agreements to fund roadway and utility upgrades."
The move comes after the the Azure giant walked back on signing leases for gigawatts of extra capacity in the US and Europe back in February, partly caused by a decision not to support further training workloads for OpenAI, Redmond's AI development partner.
Microsoft announced the first phase of its investment plan for the region last year, with the figure of an initial $1 billion investment mentioned for the facilities in New Albany, Heath, and Hebron.
At the time, the mega-corp indicated that the project had "significant growth potential" for continued investment, plus the creation of "hundreds of direct jobs" if the bit barn campuses were built out to full capacity. It said that the three sites would play a critical role in expanding its cloud infrastructure to support the rapid global growth of its digital services – much of which has been driven by its keen interest in generative AI and large language models (LLMs).
Its customers may have other feelings on artificial intelligence, such as: Is this really worth it? That may be on Redmond's mind as well as all the economic uncertainty stemming from the ongoing tariff war.
Work is understood to have actually got underway at the New Albany site, with Microsoft issuing an update last year stating that clearance of the area started in late October, and preparation work was estimated to be complete by mid-2025.
The Windows maker also told Heath residents at a "Microsoft open house" meeting last year that work on the campus there was projected to begin "in summer 2025," with the first of five datacenter buildings to be completed by early 2028.
One other possible explanation that The Register has already examined is that many datacenters will not have been designed to handle the power and cooling requirements of Nvidia's latest high-performance AI infrastructure, and some adjustments may have to be made.
Another could be that the Redmond biz needs to reassess the costs surrounding such projects and how these will be impacted by the tariffs and other economic uncertainties that the Trump administration has recently unleashed.
There have already been warnings that the latest tariffs target imports from countries including China, Taiwan, and South Korea, where a great deal of datacenter equipment and the components used within them are manufactured, which will bump up the cost of fitting out bit barns.
"There's no doubt that the equipment that goes into datacenters will become significantly more expensive ... Microsoft has already started articulating a more balanced, cautious approach to their datacenter buildout, and to some extent Amazon as well," DA Davidson's Gil Luria told Reuters.
Commercial real estate analysts CoStar noted that a 25 percent tariff on steel and aluminum, some of the raw materials used in construction, took effect March 12, which would further increase the cost of building out AI facilities.
A Bloomberg report the day after "tariff liberation day" claimed the Windows maker had "recently halted talks for, or delayed development of, sites in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin," according to its sources.
Microsoft failed to elaborate on the reasons behind its decision to halt the Ohio projects when we asked. ®
Biting the hand that feeds IT
