AI Spending Under the Microscope: Amazon Halts Some Data Center Leasing Talks

While the scale of this leasing slowdown isn’t entirely clear, Wells Fargo analysts said it mirrored a similar step taken recently by Microsoft.

This recalibration comes at a time when economic headwinds and concerns around the pace of returns on artificial intelligence investments are beginning to influence corporate strategy.

Source : Amazon

Amazon.com has reportedly paused some of its ongoing data center leasing discussions for its cloud services unit, particularly in international markets, according to a note by Wells Fargo analysts released on Monday.

While the scale of this leasing slowdown isn’t entirely clear, analysts said it mirrored a similar step taken recently by Microsoft, hinting at a broader reassessment across the tech industry when it comes to investing in large-scale infrastructure, reported Reuters.

Rather than backing out of previously signed agreements, Amazon appears to be re-evaluating recent leasing activity. "It does appear like the hyperscalers (big cloud companies) are being more discerning with leasing large clusters of power, and tightening up pre-lease windows for capacity that (would) be delivered before the end of 2026," the analysts noted.

They also mentioned that other tech giants such as Meta, Google (owned by Alphabet), and Oracle continue to pursue leasing deals actively.

This recalibration comes at a time when economic headwinds and concerns around the pace of returns on artificial intelligence investments are beginning to influence corporate strategy. Companies that had earmarked billions for AI development—including purchases of high-end hardware like Nvidia chips—are now becoming more selective.

Routine Adjustment Or Strategic Pullback?

In response to the note, Amazon emphasised that there has been no shift in its long-term growth ambitions. “This is routine capacity management, and there haven't been any recent fundamental changes in our expansion plans,” said Kevin Miller, vice president of Amazon Web Services Global Data Centers, in a LinkedIn post.

Meanwhile, rival Microsoft has pulled back more aggressively, shelving data center projects set to utilise 2 gigawatts of electricity across the US and Europe over the last six months. TD Cowen analysts cited an oversupply in capacity relative to Microsoft’s near-term demand outlook as the reason for the cancellations.

Investor sentiment has also started to cool toward the enormous capital outlays made by US technology companies on AI. A growing sense of caution is being driven by the slow pace of financial returns and increasing competition from startups like China’s DeepSeek, which has introduced AI systems at significantly lower costs compared to major Western players.

Despite the short-term recalibrations, Amazon continues to ramp up its investments in generative AI. The company  unveiled a variety of AI-powered tools aimed at businesses, sellers, and consumers. Earlier this month, CEO Andy Jassy defended the company’s multi-billion-dollar investment in AI technologies, stating that such spending is essential to maintain Amazon’s edge in the competitive cloud landscape.