Interesting AI Development

Microsoft, which has gone all-in on Large Language Model Artificial Intelligence systems has been backing out of some the leases for AI related data centers that it had negotiated.

They haven't broken any leases.  Instead they have walked away at the point where they need to sign on the dotted line.

I'm beginning to think that the folks in Redmond are realizing that AI, or at least Sam Altman's version of AI, is oversold and under-performing.

Microsoft Corp. has canceled some leases for US data center capacity, according to TD Cowen, raising broader concerns over whether it’s securing more AI computing capacity than it needs in the long term.

OpenAI’s biggest backer has voided leases in the US totaling “a couple of hundred megawatts” of capacity — the equivalent of roughly two data centers — canceling agreements with at least a couple of private operators, the US brokerage wrote Friday, citing “channel checks” or inquiries with supply chain providers. TD Cowen said its checks also suggest Microsoft has pulled back on converting so-called statements of qualifications, agreements that usually lead to formal leases. 

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A potential lease pullback by Microsoft raises broader questions about whether the company — one of the frontrunners among Big Tech in AI — is growing cautious about the outlook for overall demand. The company has said it expects to spend $80 billion this fiscal year on AI data centers, and on a late January earnings call, Chief Executive Officer Satya Nadella said Microsoft has to sustain spending to meet “exponentially more demand.” 

Gee, why would they be cautions?  Maybe because a 2nd tier Chinese player, using 3rd tier hardware, was able to match OpenAI's performance at 3% of the cost? 

Naah, it couldn't be that!

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In Friday’s report, TD Cowen’s analysts wrote that their channel checks had unearthed a number of signs that Microsoft is gradually retreating. They learned that Microsoft had let more than a gigawatt of agreements on larger sites expire and walked away from “multiple” deals involving about 100 megawatts each. (Data center capacity is often stated in terms of the power they need to stay up and running.)

Well, mabe.