The tech giant's withdrawal from new capacity leasing was largely led by the decision not to support additional training workloads from ChatGPT maker OpenAI, the analysts led by Michael Elias said in a note.
Investor skepticism about the hefty artificial intelligence spending by U.S. tech firms has increased due to slow payoffs and the rise of Chinese startup DeepSeek, which showcased AI technology at a much lower cost than its Western rivals.
TD Cowen's supply chain checks indicate that Microsoft's pullback has led to Alphabet's (GOOGL.O) Google stepping in to backfill the capacity in international markets, while Meta Platforms (META.O) does the same in the U.S.
Microsoft, whose shares were down more than 1% on Wednesday, said, while it may "strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions".
It added its plans to spend $80 billion on AI infrastructure this fiscal year are on track.
The TD Cowen analysts said in February that Microsoft had scrapped leases totaling "a couple of hundred megawatts" of capacity with at least two private data center operators.
AI cloud startup CoreWeave, which provides access to data centers, earlier this month said it had not seen any contract cancellations after the Financial Times reported that Microsoft, its largest customer, had moved away from some agreements.
Microsoft and Meta executives defended their massive AI spending after the DeepSeek reveal in January, saying it was crucial to staying competitive in the new field.
Alphabet has said it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, while Meta has pledged as much as $65 billion.
