Why Microsoft (MSFT) Stock Is Falling Today

Microsoft (MSFT) is dropping 1% after investment bank TD Cowen reported that the conglomerate had canceled some of its leases of data centers in the U.S. The news may be causing some investors to question whether demand for the tech giant’s AI products is sliding while others may believe that MSFT is overspending on data-center capacity.

Still others could fear that the firm will wind up underinvesting on data centers.

A development team working together to create the next version of Windows.

More Information About TD Cowen’s Report

MSFT has canceled leases with a total of “a couple of hundred megawatts” of capacity, TD Cowen reported. The latter amount is typically produced by two data centers. The investment bank reported that it had obtained the information by speaking to companies within Microsoft’s supply chain. TD Cowen added that Microsoft appears to have refrained from converting some tentative agreements on leasing data centers into contracts.

The investment bank believes that OpenAI may be moving some of its business from MSFT to Oracle (ORCL).

Microsoft denied that it had lowered the amount that it intends to spend on data centers during its fiscal year that ends in June.

The Recent Price Action of MSFT

In the last month, the shares have slumped 7% while they are down 3.5% in the last three moths

While we acknowledge the potential of MSFT, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: None. This article is originally published at Insider Monkey