Microsoft is still moving forward with a $1 billion data center project in Northwest Indiana despite reports that it's cutting back on building future data center capacity, cancelling leases with private-sector data center operators and walking away from land deals.
The investment bank TD Cowen reported in late February that the Seattle-based tech giant Microsoft voided leases for a significant amount of data center capacity, suggesting it fears oversupply amid a rush to build out infrastructure for the growing use of artificial intelligence.
Citing supply chain sources, analysts Michael Elias, Cooper Belanger and Gregory Williams with TD Cowen reported Microsoft cancelled a few hundred megawatts of capacity with multiple private data center operators, pulled back on converting already negotiated Statements of Qualifications into signed leases and walked away from at least five parcels where data centers were planned.
"The magnitude of both potential data center capacity it walked away from and the decision to pull back on land acquisition in our view indicates the loss of a major demand signal that Microsoft was originally responding to," the analysts noted.
Microsoft is, for instance, cancelling construction of a data center in Wisconsin that was supposed to support OpenAI, suggesting demand was not as strong as it earlier forecasted to be, the analysts reported.
A Microsoft spokesperson said it was still making record investments in data centers to meet the forecasted AI demand in the future.
"Thanks to the significant investments we have made up to this point, we are well-positioned to meet our current and increasing customer demand. Last year alone, we added more capacity than any prior year in history," a Microsoft spokesperson said in a statement. "While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions. This allows us to invest and allocate resources to growth areas for our future. Our plans to spend over $80 billion on infrastructure this fiscal year remain on track as we continue to grow at a record pace to meet customer demand."
Microsoft plans to invest $1 billion in a 245,000-square-foot data center on 500 acres of farmland on Boyd Boulevard east of U.S 35 on the south side of LaPorte. It's touted as the largest economic development project in LaPorte's history. The state is offering a 35-year data center sales tax credit as an incentive.
LaPorte Economic Advancement Partnership Executive Director Bert Cook said the project is still moving forward.
"We continue to work with their planning and engineering teams to move the LaPorte project forward," he said. "We are eager for the start of their construction next year."
Northwest Indiana is home to data centers, massive farms of computer servers that store information, in Hammond and Portage. Several more have been proposed, including three that would total $2 billion in investment in Merrillville. However, skepticism on Wall Street has been arising about whether all the forecasted data center capacity would be ultimately needed after the Chinese company DeepSeek rolled out a comparable AI product for a lower cost.
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