Microsoft has reversed course on its $1 billion plans to build data centers in Ohio, citing 'investment strategy,' as experts warn Donald Trump's tariffs will be a massive blow to the tech industry. The tech giant announced the project last year, declaring it would invest $1 billion in facilities in New Albany, Heath and Hebron, reported WBNS.
On Monday, the company revealed that they are 'pushing back plans' for the data centers and will reevaluate them in the future. 'We will continue to evaluate these sites in line with our investment strategy,' a Microsoft spokesperson told The Columbus Dispatch. 'We sincerely appreciate the leadership and partnership of Ohio government officials and the support of Licking County residents.'
The move comes as analysts warned Trump's sweeping reciprocal tariffs on tech equipment suppliers could hamstring Big Tech's billion-dollar efforts to build artificial intelligence infrastructure in the country. Microsoft's initial investment was set for $700 million in building costs and $300 million in machinery expenses, and construction was expected to start in July.
The project was supposed to create 400 construction jobs and hundreds of full-time jobs. Each of the three campuses was supposed to have one building, with the potential for several buildings on each site, The Dispatch reported. According to the local news outlet, the New Albany City Council unanimously passed a resolution last year giving Microsoft a 15-year 100 percent property tax abatement.
Despite backing out of the data center project, the company committed to following through with its development agreements to fund roadway and utility upgrades and said the land could be used for farming. The facilities were set to serve as the backbone for Microsoft Azure's capabilities as the demand for data storage and cloud technology increases.
However, Trump's tariffs are a new threat to the top cloud service providers such as Microsoft, Alphabet and Amazon, already facing skepticism from investors over their steep AI budgets. TD Cowen analysts recently said Microsoft had abandoned data-center projects that would have used 2 gigawatts of electricity in the US and Europe in the last six months due to an oversupply relative to current demand. In February, Microsoft canceled leases totaling 'a couple of hundred megawatts' of capacity with at least two private data-center operators.
The analysts added that Microsoft also paused converting statement of qualifications, or precursors to formal leases, saying other tech firms, including Meta Platforms, had previously made similar moves to lower capital spending. On Wednesday, Trump slapped steep duties on leading technology equipment suppliers including 34 percent on China, 32 percent on Taiwan and 25 percent on South Korea while imposing a 10 percent baseline tariff on all imports to the US.
'Capital expenditure by tech giants will get reshuffled: Expect major players in AI infrastructure and consumer tech to reallocate short-term spending away from expansion and toward procurement hedging or sourcing shifts,' Abhishek Singh, partner at research firm Everest Group, told Reuters. While semiconductors were exempted from Wednesday's tariffs, a White House official said the US is planning targeted tariffs for chips that could come later.
'There's no doubt that the equipment that goes into data centers will become significantly more expensive,' said D.A. Davidson analyst Gil Luria. 'Microsoft has already started articulating a more balanced, cautious approach to their data center build-out, and to some extent Amazon as well.'