# AI Demand Surge: Microsoft Anticipates Capacity Shortages Despite Data Center Investments

## AI Demand Surge: Microsoft Anticipates Capacity Shortages Despite Data Center Investments

Microsoft is bracing for potential AI service disruptions in the coming months, as demand for its artificial intelligence offerings threatens to outpace its data center capacity. During the company’s fiscal 2025 third-quarter earnings call on Wednesday, EVP and CFO Amy Hood cautioned that customers could experience AI service constraints as early as June.

“We had hoped to be in balance by the end of Q4 but we did see some increased demand, as you saw through the quarter,” Hood stated. “So we are going to be a little short, a little tight as we exit the year.”

The timing of this announcement raises questions, especially considering reports earlier this year that Microsoft had canceled several data center leases. In February, TD Cowen reported that Microsoft had canceled leases equivalent to a “couple hundred megawatts,” or about two data centers worth of capacity. More recent reports have surfaced detailing further lease cancellations by the tech giant.

Microsoft maintains that these data center adjustments are not directly related to the projected AI capacity shortages. The company has reiterated its commitment to investing $80 billion in data centers this year, with half of that earmarked for U.S.-based facilities. This significant investment underscores Microsoft’s long-term vision for AI and cloud computing.

Hood emphasized the long lead times associated with data center construction, stating that projects can take five to seven years from land acquisition to completion, and two to three years for the build-out phase. This necessitates a constant balancing act as the company monitors demand curves and adjusts its infrastructure plans accordingly.

Despite the short-term constraints, Microsoft CEO Satya Nadella highlighted the company’s ongoing expansion efforts, noting the opening of data centers across 10 new countries and four new continents during the past quarter.

While customers may experience some temporary limitations, Microsoft’s continued investment in data center infrastructure signals its commitment to meeting the rapidly growing demand for AI services in the long run. The company is actively working to bridge the gap between supply and demand, ensuring that it can continue to deliver cutting-edge AI solutions to its customers.

Meanwhile, TechCrunch is hosting TC Sessions: AI on June 5 in Berkeley, CA.