Why Are AI Stocks Falling Again?

The artificial intelligence industry is experiencing another TD Cowen shock.

The whole spectrum of companies connected to artificial intelligence — the companies that design the chips, that supply the power, that make the generation equipment — shuddered Wednesday when the brokerage released another note from analysts pointing to evidence that Microsoft was giving up on its data center leases.

“Microsoft has both (1) walked away from +2GW of capacity in both the U.S. and Europe in the last six months that was in process to be leased, and (2) has both deferred and canceled existing data center leases in both the U.S. and Europe in the last month,” the analysts wrote.

Microsoft is one of the biggest players in the artificial intelligence industry, with its near-$14 billion investment in OpenAI and a commitment to spend $80 billion on data center capacity this year.

The company is pulling back, the TD Cowen analysts said, because it had decided not to support incremental increases in training workloads for OpenAI models. Shares in Nvidia, the chip designer that’s become one of the most valuable companies in the world on the back of optimism about artificial intelligence, are down 7% since market close Tuesday, while shares in the power companies Vistra and Constellation are down 9% and 7% respectively. GE Vernova, which makes turbines for gas-fired power plants, is down 9%.

Much of the power industry saw huge increases in their stock prices in 2024, as investors bet on increased demand for electricity from data centers, manufacturing, and electrification. But 2025 so far has been a year of mild expectations.

In February, Cowen analysts issued a similar note warning that Microsoft was pulling back on some of its data center leases. And in January, of course, many of the AI and energy stocks that had been soaring 2024 dropped when the Chinese artificial intelligence company DeepSeek released an open source model comparable in performance to the state of the art in the United States but that required far less computing power to train.

The Cowen analysts were hardly doomy about AI and data center construction, writing that Google and Meta may be “backfilling” the capacity left behind by Microsoft as they seek to expand their own data center footprints.

But the case for across the board optimism may be slightly dimming across the sector. CoreWeave, which buys Nvidia chips and operates data centers, has had to reduce the amount of money its seeking to raise in its planned initial public offering to $1.5 billion, from the over $4 billion it was looking to get from investors earlier in the IPO process, Bloomberg reported. Nvidia, an investor in CoreWeave and its most important supplier, will be “anchoring” the IPO, kicking in $250 million.