Microsoft has announced it is “slowing or pausing” certain data centre construction projects, including a $1 billion development in Ohio, amid signals that the surge in demand for artificial intelligence (AI) infrastructure may be levelling off.

The company confirmed it is halting early-phase work on rural sites it owns in Licking County, near Columbus, Ohio. Two of the three properties will now be retained for agricultural use, AP reports.

“In recent years, demand for our cloud and AI services grew more than we could have ever anticipated and to meet this opportunity, we began executing the largest and most ambitious infrastructure scaling project in our history,” said Noelle Walsh, Microsoft’s president of cloud operations, in a LinkedIn post. 

Walsh added, “Any significant new endeavour at this size and scale requires agility and refinement as we learn and grow with our customers. What this means is that we are slowing or pausing some early-stage projects.”

While the tech giant has not disclosed details of other affected sites beyond Ohio, it had already paused later phases of a major data centre development in Wisconsin last December. 

Earlier this year, analysts at TD Cowen noted Microsoft had been scaling back some international expansion and cancelling data centre leases in the US. Industry watchers have linked these adjustments to shifts in Microsoft’s partnership with OpenAI, the maker of ChatGPT.

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“OpenAI was moving in one direction” by focusing on more powerful AI systems requiring vast computing capacity, while “Microsoft may not have been moving that same direction,” said Craig Ellis, research director at B Riley Securities.

In January, Microsoft and OpenAI revised their agreement, which had made Microsoft the exclusive provider of OpenAI’s computing infrastructure. The updated deal allows OpenAI to develop its own capacity, primarily for training and research.

Despite the pause, Microsoft still intends to spend over $80 billion globally on AI infrastructure in this fiscal year, which ends in June. The company says it has already doubled its data centre footprint in the past three years.

“While we may strategically pace our plans, we will continue to grow strongly and allocate investments that stay aligned with business priorities and customer demand,” said Walsh.

The decision disappointed some local officials in Licking County, which has also drawn investment from Google, Meta, and chipmaker Intel — although Intel has delayed its planned factory to 2030.