Microsoft raises scrutiny on some neocloud data center builds, Bloomberg reports

what happened

Microsoft is applying tighter controls to some data center projects run by neocloud providers Nebius, IREN and Nscale, according to Bloomberg News, which Reuters cites. Sources familiar with the situation told the agency that the Windows maker is pulling back from projects it sees as risky. Internally, the company is also weighing whether to sign fresh neocloud agreements at all.

Microsoft is concentrating on building out its own facilities, though it has not completely ruled out partner deals. A Microsoft spokesperson described the approach as flexible, mixing owned facilities, leased space and capacity from third-party partners. In afternoon trading, Nebius and IREN shares fell more than 16% and CoreWeave shares dropped about 12.3%.

The company will also not take up an option to more than double its Nscale agreement for computing capacity at a Texas site. Weeks earlier, Microsoft exited a deal to anchor Nscale's flagship campus in Loughton, Essex, because power hookup delays pushed supply into the 2030s. Adding to the uncertainty, governor-elect Gina Hinojosa has said she would halt new projects in Texas until lawmakers set rules for the industry.

why it matters

For neocloud operators, the report points to a possible slowdown in demand from one of their biggest customers, and Texas adds regulatory risk for new sites. The shares of Nebius, IREN and CoreWeave were already under pressure on the news.

market impact

Neocloud stocks Nebius, IREN and CoreWeave: weaker Microsoft demand outlook weighs on their shares

• ▼Nebius shares pressure down — reduced Microsoft appetite for new contracts with the provider
• ▼IREN shares pressure down — possible cuts to Microsoft orders for computing capacity
• ▼CoreWeave shares pressure down — concern that large customers will be more cautious about outsourcing capacity

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