Microsoft Corp MSFT has begun canceling leases for significant data center capacity in the U.S., possibly signifying AI computing overcapacity.

The Big Tech giant has canceled leases totaling hundreds of megawatts of capacity, Bloomberg cited TD Cowen Friday, citing channel checks.

Microsoft has also stopped converting agreements that usually lead to formal leases, Bloomberg cited TD Cowen.

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Previously, Meta Platforms Inc META and other rivals employed such strategies to cut back on capital spending.

Microsoft recently reiterated its plans to spend $80 billion on AI data centers this fiscal year.

During quarterly earnings call, CEO Satya Nadella told Bloomberg that Microsoft must sustain spending to meet “exponentially more demand.”

Chinese upstart DeepSeeks’s open-source AI model led to Wall Street questioning the sustainability of Microsoft, Meta, and Amazon.com Inc’s AMZN aggressive capex outlays on AI models.

Recently, Microsoft debuted the Majorana 1 quantum chip for industrial-scale problem-solving. Last December, Alphabet Inc’s GOOG GOOGL Google announced its quantum chip Willow.

Wall Street firms, including Bank of America, DA Davidson, RBC Capital, JPMorgan, Truist, Piper Sandler, and Goldman Sachs, had highlighted how Azure results overshadowed the potential AI upside during the second-quarter report.

Price Action: MSFT stock is down by 1.30% to $402.92 at the last check on Monday.

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