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Microsoft Corp. (NASDAQ:MSFT) is reportedly scaling back its reliance on third-party AI cloud providers, putting its own data centers first in a move that raises fresh questions for the debt-heavy neocloud sector.

Microsoft is still evaluating which neoclouds to drop, CNBC reported on Friday, citing two people familiar with the matter.

Neoclouds are specialized cloud service providers that rent out graphics processing units (GPUs), the chips powering AI workloads.

Microsoft wants to prioritize its own data center footprint. Two people said Microsoft opted not to renew a deal with Oracle Corp. (NYSE:ORCL), according to the report.

Microsoft did not immediately respond to Benzinga’s request for comment.

Neocloud Stocks Under Strain

Shares of CoreWeave Inc. (NASDAQ:CRWV), Nebius Group N.V. (NASDAQ:NBIS) and IREN Ltd. (NASDAQ:IREN) are each down roughly 45% over the past month, even after rallying Friday. Rising rates have fueled fears that the firms rely too heavily on debt.

Concerns about data center expansion also grew after a Democratic midterm sweep.

Microsoft turned to neoclouds after ChatGPT’s 2022 launch sparked a surge in GPU demand. CoreWeave, which went public last year, said in a regulatory filing in March 2025 that Microsoft accounted for 62% of its 2024 revenue.

Power Limits, Delays Hit Microsoft AI Buildout

Microsoft has already walked away from an Nscale site in England. Darren Hardman, Microsoft’s U.K. and Ireland CEO, told CNBC in October the decision was tied to Nscale’s access to electricity. The Financial Times reported this week that Microsoft won’t renew an Nscale contract in Texas.

CFO Amy Hood said in October that some GPU-related cloud contracts slipped to the first half of 2027, weighing on Azure growth. Capital expenditures and finance leases hit $45.2 billion last quarter.

The Information reported that delays at IREN’s Childress, Texas, site led Microsoft to push back planned spending of about $5 billion. It is unclear how much of that gap IREN accounts for. IREN is building the site under a five-year contract worth about $9.7 billion. Satellite analysis by research firm Aterio points to possible delays at that site and at a Nebius project in Vineland, New Jersey, where about 140 megawatts could slip into 2027.

IREN said Thursday it handed over capacity in August, but a customer-requested networking upgrade pushes it online to January or February. Iren’s AI revenue more than doubled to $200 million. The company expects about $15 billion in capital spending for its fiscal year ending June 30, 2027 and is still seeking financing for roughly $6 billion of it.

Microsoft has a market capitalization of about $3.94 trillion. Over the past 52 weeks, its stock has traded as high as $559.15 and as low as $349.20.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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