Microsoft has withdrawn from a $1 billion data center development in Licking County, Ohio, terminating a plan that had been quietly in motion for more than a year. The company had acquired over 200 acres through legal entities linked to Microsoft and secured property tax abatements in New Albany, Etna, and Johnstown. But as of April 8, local officials confirmed the company had pulled out of the project, citing a “reevaluation of our data center strategy.”
Municipal leaders expressed frustration over the sudden reversal, which came with no advance notice from the company. As reported by the Columbus Dispatch, local officials were described as surprised and disappointed after months of behind-the-scenes negotiations and zoning adjustments.
Rethinking Infrastructure From the Inside Out
The Ohio cancellation is one of several recent data center project retreats. In January, Microsoft announced a pause on its $3.3 billion data center campus in Mount Pleasant, Wisconsin. That project had been unveiled in May 2024 during an event with President Joe Biden and Microsoft President Brad Smith. Microsoft spokespersons later explained to Wisconsin Public Radio, “We have temporarily paused early construction work for this second phase while evaluating scope and recent changes in technology.”
This strategic reassessment contrasts with Microsoft’s position earlier in the year. On January 4, the company announced it would invest $80 billion in fiscal 2025 to expand AI-enabled infrastructure, with more than half of that earmarked for U.S. deployments. Brad Smith wrote, “In many ways, artificial intelligence is the electricity of our age, and the next four years can build a foundation for America’s economic success for the next quarter century.”
But in recent weeks, it has become clear that Microsoft is stepping back from projects with uncertain power availability, timeline risks, or partner dependencies. The company has reportedly canceled or deferred plans involving more than 2 gigawatts of data center capacity across the U.S. and Europe.
Strategic Realignment: Less Outsourcing, More Control
A major factor in this retrenchment is Microsoft’s evolving relationship with OpenAI and its shift toward internal infrastructure and chip design. The company has stepped away from a proposed $12 billion agreement with CoreWeave, a GPU cloud provider that previously supported OpenAI workloads. Microsoft instead allowed OpenAI to assume the contract directly.
While CoreWeave denied contract cancellations, stating “There have been no contract cancellations or walking away from commitments. Any claim to the contrary is false and misleading,” Microsoft’s broader shift is evident. It ended its exclusive cloud hosting agreement with OpenAI in January and is developing proprietary AI chips with AMD to reduce reliance on Nvidia-based GPUs.
Meanwhile, OpenAI is pursuing its own massive infrastructure plans through its Stargate Project joint venture, betting on Softbank as its now leading investor. The $500 billion initiative, launched with Oracle and SoftBank, will fund the construction of new AI training centers across the United States.
Mounting Pressure on Energy and Costs
The infrastructure pullback also comes amid intensifying scrutiny over AI-driven energy demands. Power usage from U.S. data centers has tripled in the past decade and could triple again by 2028, according to Reuters. In one 2024 incident, a surge protector failure in Virginia caused 60 data centers to disconnect from the grid, injecting 1,500 megawatts back into the system and nearly destabilizing it.
Utilities are struggling to keep up. Oncor Electric Delivery, a Texas power company, has received data center power requests totaling 119 gigawatts—more than ten times the peak usage of some states.
Microsoft has begun focusing on sites with more resilient energy infrastructure. It is reportedly considering data center expansion in the Nordic region, where access to emission-free power and cold climate cooling efficiencies provide a more stable foundation.
Alternative Power Sources and Revived Sites
Microsoft is also experimenting with alternative power strategies at its existing facilities. In Wisconsin, the paused Mount Pleasant site is expected to integrate a 250-megawatt solar project and adopt a closed-loop cooling system designed to recycle water instead of wasting it through evaporation.
In parallel, other tech players are transforming older energy infrastructure. The shuttered Homer City coal plant in Pennsylvania is being redeveloped into a $10 billion natural gas-powered data center hub—a move driven by the surging demand for reliable power to support AI workloads.
Microsoft is also exploring nuclear options. The company is backing plans to bring the closed Three Mile Island nuclear plant back online by 2028 as part of its decarbonization efforts.
Adding to the pressure, the Trump administration imposed tariffs on imported tech equipment which target mainly China, Taiwan, and South Korea. These tariffs are expected to increase costs for data center construction in the U.S., prompting Microsoft to push for regulatory relief.
From Expansion to Precision
As competitors like Meta, Google, and Amazon Web Services ramp up their investments in large-scale infrastructure, Microsoft is charting a more cautious course. With billions still budgeted for AI, the company is not stepping away from the race. But it is clearly narrowing its focus to deployments that offer efficiency, energy security, and direct control over compute resources.
The termination of the Ohio project is the most visible signal yet of this pivot. Microsoft may still be spending heavily on AI infrastructure—but where it does so, and how, is changing.
