Microsoft plans to use fewer neoclouds as AI buildout shows signs of strain

Microsoft is shrinking its roster of neocloud partners as it focuses on work with a few key suppliers and builds out its own data centers, according to people familiar with the matter.

The software giant’s plans pose another potential challenge for a corner of the artificial intelligence market that’s showing signs of strain due to rising borrowing costs, hefty debt loads and concerns about whether the buildout will slow down.

Microsoft has forged relationships in recent years with a number of neoclouds, including CoreWeave, Nebius, Chronoscale, IREN, Lambda and Nscale, as well as with Oracle, which is pouring money into building out AI infrastructure.

Microsoft is now in the evaluation stage and hasn’t decided which neoclouds it will stop using, said two sources, who asked not to be named because the talks are confidential. One of the people said Microsoft wants to prioritize its own data center footprint. Bloomberg reported on the plans earlier. Two people said that Microsoft…