According to recent reports from Wells Fargo and TD Cowen, two prominent US banks, Amazon has paused negotiations for several international data centers, primarily in Europe. Shortly after this news broke, Microsoft was also reported to have paused or canceled some of its own projects. Wells Fargo's report stated, "The precise scope of the pause remains unclear, but the move mirrors recent activity from Microsoft—they are digesting recent aggressive leasing." The report emphasized that Microsoft appears to be still moving forward with already signed deals.
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Co-location of data centers—sharing the substantial infrastructure costs with other companies—is crucial for businesses needing this infrastructure. Meanwhile, other companies like Meta and xAI are still actively expanding their data centers to support their AI model needs. The massive scale of data center construction requires significant power, and the power grid is struggling to meet this demand. Therefore, Amazon may need more time to open data centers already under construction. According to Wells Fargo's report, Amazon currently has 9 gigawatts of effective power capacity within its existing data center infrastructure.
This news further fuels concerns about weakening AI infrastructure demand, as many businesses are still struggling to find effective ways to save time and money using the new technology. Furthermore, the Trump administration's trade war has created stock market volatility, with Amazon's stock price down 24% this year. Analysts point to the impact of Chinese tariffs on Amazon, estimating that over 70% of its marketplace goods originate from China. Economists worry that the trade war and a potential recession could slow the AI boom, with major players like Nvidia caught in the storm. Nvidia derives a significant portion of its business from China and is currently under scrutiny for potential sanctions evasion related to high-end chips being shipped to China.
Amazon is scheduled to release its next quarterly earnings on May 1st, and the market will be closely watching for any changes in AI demand. Microsoft's recent pullback from a $1 billion data center project in Ohio surprised local officials who had offered substantial tax incentives, despite concerns about the potential job creation and massive energy and water demands of the project. Microsoft CEO Satya Nadella, in an interview, attempted to temper expectations around the AI revolution, stating that the technology hasn't yet been a significant driver of the US economy, although the company reiterated plans to invest $80 billion in infrastructure over the coming years.
Key Takeaways:
🌐 Amazon has paused negotiations for some international data centers, primarily in Europe.
📉 AI infrastructure demand may be weakening due to trade wars and a poor economic climate.
💼 Microsoft has also scaled back a $1 billion data center project in Ohio, creating uncertainty for the local economy.
