Microsoft’s AI expansion faces hurdles as data center projects lag

Analysis of satellite imagery suggests potential issues with data center projects undertaken by neocloud companies, sparking concerns about their ability to fulfill multibillion-dollar commitments and causing a drop in neocloud stock values.

Research firm Aterio’s satellite analysis identified two projects potentially contributing to the delays. In Texas, IREN is constructing four data centers under a $9.7 billion agreement with Microsoft. A recent flyover indicated that Horizon 4 lacks essential backup power generators and cooling equipment, potentially missing its year-end delivery deadline. IREN previously experienced delays with Horizon 1 due to equipment shortages, which Microsoft accepted in August.

In New Jersey, DataOne is developing a project for Nebius under a $17.4 billion deal. Aterio estimates that approximately 140 megawatts of this project’s capacity may not be operational until 2027. DataOne has faced permitting challenges, including a $1 million fine in September for operating generators without proper authorization.

Microsoft also terminated a deal with neocloud Nscale in October due to power supply issues. Estimates from Currence suggest that 30% to 50% of planned data center capacity initially slated for this year could be postponed until 2027 or later, due to electricity shortages and construction challenges.

A Microsoft spokesperson stated the company’s infrastructure strategy prioritizes flexibility and incorporates a mix of owned, leased, and third-party facilities. IREN and DataOne declined to comment, while Nebius did not respond to requests for comment.