By Aditya Soni

Feb 24 (Reuters) - Microsoft ( MSFT ) has scrapped leases for

sizeable data center capacity in the U.S., suggesting a

potential oversupply at the tech giant as it builds out

artificial intelligence infrastructure to meet a potential

demand surge, TD Cowen analysts said.

Skepticism has been growing among investors over the

billions of dollars U.S. tech firms have been channeling into AI

infrastructure due to slow payoffs and breakthroughs at Chinese

startup DeepSeek, which has showcased AI tech on par with or

even better than its Western rivals at a fraction of the cost.

Redmond, Washington-based Microsoft ( MSFT ) has canceled

leases totaling "a couple of hundred megawatts" of capacity with

at least two private data-center operators, the analysts led by

Michael Elias said, citing supply chain checks.

Microsoft ( MSFT ) has also paused converting statement of

qualifications, or precursors to formal leases, the analysts

added, saying other tech firms including Meta Platforms ( META )

had previously made similar moves to lower capital spending.

The note was published late on Friday but it picked up

traction on social media platforms over the weekend, with

several media outlets covering the development on Monday.

Microsoft ( MSFT ), the main backer of ChatGPT-maker OpenAI, did not

immediately respond to a request for comment on Monday.

Brokerage Jefferies, currently hosting the Microsoft ( MSFT )

investor relations team in Sydney, said the company has strongly

denied any change to its data center plans.

The company's shares, which underperformed most Big Tech

stocks last year, rose about 0.5% in premarket U.S. trading.

Any lease cancellations would mark a sharp shift for a

company that months ago earmarked $80 billion in capital

spending for this fiscal year, mostly for AI. Microsoft ( MSFT ) has

called the spending crucial to easing supply bottlenecks that

limit its ability to meet AI demand.

The news could possibly indicate lower demand, Bernstein

analyst Mark Moelder said, especially after lackluster quarterly

results from major cloud companies, but it was also reflective

of the capacity build-up at Microsoft ( MSFT ) in the past years.

"Microsoft ( MSFT ) needed to meet demand and had a great deal of

difficulty finding capacity. Management may, therefore, have

rented, even at a meaningful premium, data centers and GPU

capacity and negotiated more deals for additional future

capacity than they needed," Moelder said.