Microsoft, Amazon Hit Pause on Data Centre Leases, Here's What it Means for Tech Giants

Microsoft, Amazon and other tech giants are now reassessing their spending plans owing to Trump's tariff play and its eventual result: economic uncertainty. Analysts at Wells Fargo pointed out that e-commerce giant Amazon has reportedly delayed new data centre leases. This follows a similar move by Microsoft, which abandoned its data centre project last month.

While this might indicate a slower-than-expected pace of high spending by tech giants, heightened uncertainty due to tariffs might make things further complicated for them.

Major tech stocks, this year, have witnessed a sharp plummet in share prices, including Meta, Apple and Amazon. Microsoft shares have dropped over 14% on a year-to-date basis. The tech-heavy index Nasdaq has dropped over 17% during the same period.

Even Wall Street's star stock, Nvidia has not remained immune to the subdued outlook and has experienced some of the worst declines.

It is worth mentioning that initially, all major tech giants were planning to ramp up their capex in the upcoming quarters to ride the AI wave and meet an ever-increasing demand for the same. However, Trump's reciprocal tariffs have pushed import costs higher. Plus, concerns around a prospective slowdown in the US economy have weighed down tech giants' spending plans.

“Over the weekend, we heard from several industry sources that AWS has paused a portion of its leasing discussions on the colocation side (particularly international ones),” Wells Fargo analysts stated in a note. The analysts also said that Microsoft is taking a similar positioning. Both companies are scaling back on some upcoming projects, but they continue to move forward with deals that have already been signed.

A U-turn on Spending plans?

Not exactly. While both Amazon and Microsoft are scaling back on some upcoming projects, they continue to move forward with deals that have already been signed. However, if such delays continue, it might take a toll on investor confidence which is already triggered due to macro uncertainty.

This sentiment has been quite visible in the share price movement of major tech giants. The NYSE Fang+ index, which tracks the share price of top US tech firms, has dropped over 2,300 points so far this year. Major cloud service providers announced aggressive spending plans to secure Nvidia's graphics processing units (GPUs) and build data centres, earlier this year. But again, that was before Trump dropped the tariff card on nations. As for now, a lot remains dependent on tech giants' Q1 performance.