Power Cut

Microsoft has, through a combination of canceled leases, pullbacks on Statements of Qualifications, cancellations of land parcels and deliberate expiration of Letters of Intent, effectively abandoned data center expansion equivalent to over 14% of its current capacity.

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The reason I'm writing in such blunt-force terms is that I want to make it clear that Microsoft is effectively cutting its data center expansion by over a gigawatt of capacity, if not more, and it’s impossible to reconcile these cuts with the expectation that generative AI will be a massive, transformative technological phenomenon. 

I believe the reason Microsoft is cutting back is that it does not have the appetite to provide further data center expansion for OpenAI, and it’s having doubts about the future of generative AI as a whole. If Microsoft believed there was a massive opportunity in supporting OpenAI's further growth, or that it had "massive demand" for generative AI services, there would be no reason to cancel capacity, let alone cancel such a significant amount.

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Microsoft is cancelling plans to massively expand its data center capacity right at a time when OpenAI just released its most computationally-demanding model ever. How do you reconcile those two things without concluding either that Microsoft expects GPT-4.5 to be a flop, or that it’s simply unwilling to continue bankrolling OpenAI’s continued growth, or that it’s having doubts about the future of generative AI as a whole?

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Generative AI does not have meaningful mass-market use cases, and while ChatGPT may have 400 million weekly active users, as I described last week, there doesn’t appear to be meaningful consumer adoption outside of ChatGPT, mostly because almost all AI coverage inevitably ends up marketing one company: OpenAI. Argue with me all you want about your personal experiences with ChatGPT, or how you’ve found it personally useful. That doesn’t make it a product with mass-market utility, or enterprise utility, or worth the vast sums of money being ploughed into generative AI.