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Microsoft tightens oversight of neocloud data center projects, Bloomberg News reports
Microsoft is tightening oversight of some data centre projects run by neocloud providers Nebius, IREN and Nscale, according to a Bloomberg report citing people familiar with the matter. The reported shift suggests the company is being more cautious about securing computing capacity from third parties as it expands its own facilities.
Microsoft is reportedly stepping away from projects it considers risky and debating whether to sign further neocloud deals, though it has not ruled them out. It will not take up an option to more than double its agreement to rent computing power from Nscale at a Texas data centre, and recently withdrew from anchoring Nscale’s planned Loughton site after power delays pushed supply into the 2030s. Shares of Nebius and IREN fell more than 16 per cent, while CoreWeave dropped 12.29 per cent.
In short
- Microsoft is reassessing some neocloud data centre projects.
- It will not expand its Nscale agreement in Texas.
- Nebius and IREN shares fell more than 16 per cent.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Closer oversight and caution about new commitments could help Microsoft avoid relying on projects whose power supply or delivery timetable is uncertain. That may protect customers from delays and limit the financial and operational risks of securing large amounts of computing capacity before sites are ready.
The case against
Scaling back or delaying commitments could make it harder for neocloud providers to finance the infrastructure needed to meet rising demand for computing power. A more cautious approach may also reduce the capacity available to Microsoft and its customers, especially if building its own facilities takes time.
Explained simply
Microsoft runs cloud computing services that rely on large data centres, which house the servers used to store information and run software. It also rents computing capacity from specialist providers known as “neoclouds”, including Nebius, IREN and Nscale, rather than building every facility itself.
These providers are investing in data centres to meet demand for computing power, including for artificial intelligence. Their projects depend on securing sites, electricity and customers; delays can affect when capacity becomes available and whether agreements go ahead.
Microsoft’s choices matter to the providers because a major customer can help support the cost of building a data centre. They also matter to businesses relying on cloud services, as technology companies weigh how to secure enough computing capacity from their own facilities and outside suppliers.