Portrait Weekly Framing: Data Centers & Capital Spending

May 14, 2025

Welcome to this week’s edition of the Portrait Weekly Framing. Today, we’ll be taking a look at the potential impacts of reports of tech giants looking to slow spending on data centers.

After several quarters of eye popping spending on data centers and AI infrastructure capex, we may finally be seeing signs of the AI infrastructure craze slowing. Specifically, a recent article from Reuters highlights pauses and cancellations from Amazon and Microsoft in their quest to add data center capacity.

While both businesses continue to add capacity on an absolute basis, we may be seeing an overall shift from growth at any cost to a more moderated approach. To dig into the nuances of these shifts – and who might be affected – I decided to turn to Portrait.

Specifically, I started by asking Portrait to scour through Microsoft and Amazon’s communications, reports, and news, finding instances of the companies pausing or slowing spending on new projects. Then, I wanted to see which companies specifically may be impacted.

Instances of Microsoft and Amazon Halting or Pausing Data Center Projects and Potentially Impacted Companies

Microsoft's Data Center Pauses and Slowdowns

Confirmed Project Pauses

Microsoft has implemented several significant pauses on data center projects globally between 2024 and 2025:

Ohio Projects: In April 2025, Microsoft paused a $1 billion plan to build three data centers in central Ohio (New Albany, Hebron, and Heath). Construction had already begun at the New Albany site with Ames Construction as the general contractor (Web - Research - MSFT).
Wisconsin Expansion: Microsoft put on hold portions of a $3.3 billion data center in Wisconsin, mentioned in connection with the Ohio pause (Web - Research - MSFT).
Global Projects: Microsoft has halted or delayed data center projects across multiple regions:
- Indonesia: Paused work on a campus in Jakarta
- United Kingdom: Delayed unspecified projects
- Australia: Delayed unspecified projects
- United States: Paused projects in Illinois, North Dakota, and Wisconsin (Web - Research - MSFT)
Mount Pleasant: Microsoft paused an expansion of its Mount Pleasant data center (Web - Research - MSFT).

Scale of the Pullback

The scale of Microsoft's pullback appears significant:

TD Cowen analysts reported in February 2025 that Microsoft had withdrawn from approximately 200MW of data center leasing agreements (Web - Research - MSFT).
By March 2025, this had expanded to an estimated 2GW of data center projects across the US and Europe (Web - Research - MSFT).
By April 2025, the pullback had extended to the APAC region as well (Web - Research - MSFT).

Microsoft's Official Position

Microsoft's consistent response to these reports has been:

"Thanks to the significant investments we have made up to this point, we are well positioned to meet our current and increasing customer demand. Last year alone, we added more capacity than any prior year in history. While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions... Our plans to spend over $80bn on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand." (Web - Research - MSFT)

Noelle Walsh, president of Microsoft Cloud Operations and Innovation, confirmed they are "slowing or pausing some early-stage projects" while refining cloud capacity buildout relative to customer demand. She emphasized that Microsoft has doubled its data center capacity in the last three years and remains on track to spend the budgeted $80 billion or more in 2025 (Web - Research - MSFT).

Amazon's Data Center Pauses and Slowdowns

Amazon Web Services (AWS) has also implemented selective pauses in its data center expansion:

Colocation Leasing: Between April 2024 and April 2025, AWS paused a portion of its leasing discussions for new data centers, especially on the colocation side and particularly in international markets (Web - Research - AMZN).
Characterization of Pauses: These actions were characterized as a "pause" or "digestion" period rather than outright cancellations. The company appears to be "digesting aggressive recent lease-up deals" (Web - Research - AMZN).
AWS Executive Statements: Kevin Miller, vice president of global data centers at AWS, explained that the change in the hyperscaler's data center plans is "routine capacity management, and there haven't been any recent fundamental changes in our expansion plans" (Web - Research - AMZN).

Unlike Microsoft, Amazon's financial documents and earnings calls show no evidence of a broader pullback in data center investments. In fact, Amazon's capital expenditures have been accelerating:

Amazon's capital expenditure data shows a significant acceleration rather than any pause in infrastructure investments, with "purchases of property and equipment, net of proceeds from sales and incentives" increasing dramatically to $77,658 million in Q4 2024, up from $48,133 million in Q4 2023 (a 61% year-over-year increase) (Amazon.com, Inc., Q4 2024 Earnings Call, Feb 06, 2025).

Companies Potentially Impacted

1. Colocation Providers and REITs

These companies are directly impacted since both AWS and Microsoft are large tenants and customers:

Equinix, Digital Realty, CyrusOne: Slower leasing or paused commitments could impact their near-term leasing volumes, growth rates, and project pipelines (Web - Research - AMZN).
Data Center REITs: Headlines reinforcing concerns of AI CapEx bubble amid reporting that Microsoft had withdrawn some of its agreements with CoreWeave (News - March 2025 - MSFT).

2. Construction and Engineering Firms

Ames Construction: Directly impacted as the general contractor for Microsoft's paused New Albany data center project (Web - Research - MSFT).
Other Construction Contractors: Companies involved in building new data centers for hyperscale clients will experience immediate revenue impacts (Web - Research - MSFT).

3. Hardware and Equipment Suppliers

Server Manufacturers: Companies producing servers and other computing hardware for data centers may see reduced or delayed orders.
Networking Equipment Providers: Suppliers of routers, switches, and other networking infrastructure could experience delayed or reduced orders.
ABB: RBC notes ABB organised a call with CEO Moren Wierod who revealed a "pause of orders from Microsoft" relating to data center investments, with MSFT pausing an order by 30-40 days (News - February 2025 - MSFT).

4. Power Producers

Constellation Energy (CEG): Microsoft signed a $16B 20-yr power purchase agreement with Constellation Energy to restart a nuclear reactor at its Three Mile Island plant in PA. CEG shares fell 6.1% following reports of Microsoft's data center pullback (News - February 2025 - MSFT).
Other Power Producers: VST (down 4.3%), TLN (down 2.3%), NRG (down 1.7%), NPWR (down 6.5%) all experienced share price declines following reports of Microsoft's data center pullback (News - February 2025 - MSFT).

5. Third-Party Data Center Providers

CoreWeave: Reports suggested Microsoft withdrew from some of its agreements with CoreWeave worth billions, though CoreWeave denied these claims. The Information had previously reported that CoreWeave told investors Microsoft plans to spend ~$10B between 2023 and 2030 to use its data centers (News - March 2025 - MSFT).

6. Regional Economic Impact

Local Economic Development: Communities like Licking County, Ohio will experience delayed economic benefits from construction jobs and tax revenue (Web - Research - MSFT).
Utility Companies: Local utilities expecting increased demand from data centers may need to revise growth projections (Web - Research - MSFT).

From the results, we learn that Microsoft has made several significant pauses in its data center spending. Taking a step back, however, the actual numbers from both companies illustrate that current spending is still high and growing.

Nonetheless, our results also show us a list of companies which may be impacted from shifts in spending, including colocation providers, construction firms, power providers, and more. To research these companies further, I gathered all mentioned companies into a list of tickers. I then fed these tickers into Portrait’s Research function to sort by susceptibility to data center slowdowns.

Ranking Companies by Susceptibility to Hyperscaler Data Center Slowdowns

This analysis ranks the provided companies by their susceptibility to negative impacts from Microsoft and Amazon pausing or halting data center development, considering their specific and broader data center exposure, financial implications, and potential second-order effects.

Most Susceptible

NRG Energy (NRG): NRG has made substantial strategic investments in the data center market, making it highly vulnerable to slowdowns. The company has formed a joint venture with GE Vernova and Kiewit to develop 5 GW of natural gas power plants specifically for data centers, with initial projects totaling 1.2 GW expected online between 2029 and 2032. (Web - Research - NRG, NRG Energy, Inc., Q4 2024 Earnings Call, Feb 26, 2025) NRG has also signed letters of intent with data center developers PowLan and Menlo Equities for projects totaling over 800 MW, with ambitions to serve up to 15 GW of data center capacity. (Web - Research - NRG) This aggressive focus on data center power demand exposes NRG to significant financial and strategic risks if hyperscaler growth falters. While NRG's Q3 2024 earnings presentation doesn't explicitly mention data centers as a major customer segment, their broader strategy clearly prioritizes this market. (NRG Energy, Inc., Q3 2024 Earnings Call, Nov 08, 2024)
Vertiv Holdings Co. (VRT): As a global provider of critical digital infrastructure and continuity solutions, Vertiv's business is inherently tied to data center growth. (Web - Research - VRT) Their Q1 2025 earnings presentation highlights strong performance driven by demand in colocation and hyperscale markets, indicating significant exposure to these segments. (Vertiv Holdings Co, Q1 2025 Earnings Call, Apr 23, 2025) While Vertiv benefits from a diversified customer base and a strong $7.9 billion backlog, a prolonged slowdown in hyperscaler spending could impact future orders and dampen their growth trajectory. (Vertiv Holdings Co, Q1 2025 Earnings Call, Apr 23, 2025)

Moderately Susceptible

Talen Energy (TLN): Talen has a notable direct exposure to AWS through the sale of its Cumulus data center campus and a long-term power purchase agreement (PPA). (Talen Energy Corporation, Q4 2024 Earnings Call, Feb 27, 2025, Talen Energy Corporation - Analyst/Investor Day (Presentation) ) This strategic relationship makes them susceptible to AWS's data center investment decisions. However, Talen's diversified power generation portfolio, including nuclear, gas, and coal assets, provides some insulation against AWS-specific slowdowns. (Web - Research - TLN) Their Q3 2024 earnings presentation highlights their focus on data centers as a growth opportunity, but their overall business remains diversified. (Talen Energy Corporation, Q3 2024 Earnings Call, Nov 14, 2024) The FERC's rejection of their ISA amendment to increase capacity for AWS adds regulatory uncertainty to their data center strategy. (TLN 8-K 11/03/24 Unknown)
Nebius Group (NBIS): Nebius is a pure-play AI infrastructure provider, making them highly dependent on the growth of the AI market, which is closely tied to data center expansion. (Web - Research - NBIS) Their core business revolves around building and operating large-scale GPU clusters and cloud platforms for AI workloads. (Nebius Group N.V. - Special Call) While Nebius has a strong cash position and ambitious expansion plans, their reliance on NVIDIA GPUs and their focus on a nascent market create vulnerabilities to broader industry slowdowns and NVIDIA's performance. (Nebius Group N.V. - Special Call, Nebius Group N.V., Q4 2024 Earnings Call, Feb 20, 2025)
Constellation Energy (CEG): Constellation has indirect exposure to data centers as a major energy provider. (Web - Research - CEG) Their diversified customer base and regulated operations offer some protection against sector-specific fluctuations. (Web - Research - CEG) However, their significant partnership with Microsoft for the Crane Clean Energy Center, while backed by a long-term contract, ties a substantial portion of their future revenue to Microsoft's long-term energy strategy, which is indirectly linked to data center demand. (Constellation Energy Corporation - Special Call (Presentation))
Digital Realty (DLR): Digital Realty is a global data center REIT with a diversified portfolio serving both hyperscalers and enterprises. (Web - Research - DLR) While their customer and geographic diversification provides some buffer, their Q1 2025 results show that a significant portion of their bookings (71%) comes from >1MW deployments, which are typically associated with hyperscalers. (Digital Realty Trust, Inc., Q1 2025 Earnings Call, Apr 24, 2025 (Presentation)) Their substantial development pipeline (814 MW under construction) also creates some vulnerability to hyperscaler slowdowns. (Digital Realty Trust, Inc., Q1 2025 Earnings Call, Apr 24, 2025 (Presentation)) However, their strategic focus on interconnection, smaller deployments (0-1MW), and a strong balance sheet provide mitigating factors. (Digital Realty Trust, Inc., Q4 2024 Earnings Call, Feb 13, 2025 (Presentation))

Least Susceptible

Vistra Corp. (VST): Vistra is a diversified energy company with a broad customer base across residential, commercial, and industrial segments. (Web - Research - VST) While data centers represent a growing portion of their customer base, they are not Vistra's primary revenue source. (Web - Research - VST) Their integrated business model (generation and retail) and geographic diversification further reduce their reliance on any single customer segment or market. (Vistra Corp., Q3 2024 Earnings Call, Nov 07, 2024) While Vistra has announced projects related to Microsoft and Amazon contracts, these are part of their broader strategic initiatives and not central to their current business. (Vistra Corp., 2024 Earnings Call, Feb 27, 2025 (Presentation))
NET Power (NPWR): NET Power is a pre-revenue clean energy technology company with a long-term focus on the data center market. (Web - Research - NPWR) Their current lack of revenue from data center customers insulates them from immediate financial impacts of hyperscaler slowdowns. (Net Power Inc., Q4 2024 Earnings Call, Mar 10, 2025 (Presentation)) Their extended commercialization timeline (earliest deployment in 2029) provides ample time to adapt their strategy to evolving market conditions. (Net Power Inc., Q4 2024 Earnings Call, Mar 10, 2025 (Presentation)) Furthermore, their diversified target markets, including utility-scale power generation and industrial applications, reduce their dependence on data center growth. (Net Power Inc., Q4 2024 Earnings Call, Mar 10, 2025 (Presentation), NET Power Inc., Q3 2024 Earnings Call, Nov 12, 2024 (Presentation))

We can see from the results that Vertiv, a company focused on digital infrastructure, finds itself more susceptible, while Vistra, a more diversified energy company, is less susceptible. Just looking at the companies’ Case Studies, we see this difference as well. While Vertiv’s core debate centers around AI demand, Vistra’s demand debate seems more balanced, including not only AI-demand, but also diversified sources of growth.

Vertiv Key Debates

AI-driven demand and Vertiv's positioning

The rapid growth of artificial intelligence (AI) and its impact on data center infrastructure is a key debate surrounding Vertiv.

Bull case:

Vertiv is well-positioned to benefit from increased AI adoption, with management noting that "Most of these hyperscalers have confirmed significant increases in their CapEx spend to support AI. This means large investments in data center builds that need our equipment and services."
The company's expertise in power management is becoming increasingly crucial, as "AI is going to drive the need for much more power and much more complexity around the distribution of that power in a data center."
Vertiv's strong presence in the Americas market, particularly in colocation and hyperscale orders (up 50% TTM), suggests they are capturing a significant share of AI-driven growth.

Bear case:

The AI boom may be overhyped, and actual data center investments might not match current expectations.
Competitors may develop more advanced solutions for AI-specific data center needs, potentially eroding Vertiv's market share.
The company's weaker performance in EMEA suggests that AI-driven growth may not be uniform across all regions, potentially limiting Vertiv's global growth potential.

Vistra Key Debates

Load Growth and Grid Reliability

The rapid increase in load growth, particularly in PJM and ERCOT markets, is a central focus for Vistra and investors. This debate centers on the company's ability to capitalize on growing demand while ensuring grid reliability.