Market volatility is prompting Microsoft (MSFT) and other technology companies to re-evaluate investments in data centers, which could have a knock-on effect for development of some natural gas midstream projects.
MSFT is pulling back on some of its data center plans, an executive confirmed earlier this month. Noelle Walsh, president of MSFT cloud computing operations, said in a LinkedIn post that the company is “slowing or pausing some early-stage projects” as it reviews its data center strategy.
Microsoft is one of the leading developers of data centers. In the Data Center Demand Monitor, East Daley Analytics is following 18 projects by MSFT totaling over 5 GW of potential electric demand. These proposals span 10 states, from Georgia, North Carolina and Virginia in the Southeast to Ohio, Texas and Washington. MSFT is also the anchor customer for the Wisconsin Reliability project on TC Energy’s (TRP) ANR Pipeline to supply a data center in Mount Pleasant, WI.
Microsoft plans to spend $80B in 2025 on data centers to deploy AI and train language models. “By nature, any significant new endeavor at this size and scale requires agility and refinement as we learn and grow with our customers,” Walsh said in the post.
The MSFT decision comes amid growing uncertainty in the technology sector over the ultimate cost of tariffs. The Trump administration threatened, enacted, then postponed global tariffs earlier in April, leading to wild gyrations in markets.
For now, the administration plans to negotiate individual trade deals with countries during a 90-day pause on retaliatory tariffs. But a 10% duty remains on most imports, plus prohibitive tariffs targeting goods from China, a major supplier of electronic hardware. President Trump on April 9 raised tariffs on Chinese imports to 145%, and Beijing retaliated with a 125% tariff on all US goods.
In the Data Center Demand Monitor, EDA is tracking 360+ data center projects totaling over 113 GW of potential electricity demand (see figure). Natural gas is expected to be the main source of power generation to meet this growing demand, so a slowdown creates risks for E&P and midstream companies.
The sheer volume of announced data centers is likely to put a strain on the grid in the coming years, but this pressure would be alleviated if companies begin postponing or canceling projects. East Daley recently reviewed the bear case for data center development, including factors like efficiency gains from new AI models, and tariff uncertainty is another reason to hit the brakes. Developers are likely to reconsider investments in long-lead projects that could see escalating prices and cost overruns.
A slowdown would mean less momentum for midstream expansions and slower demand growth. Greenfield pipeline projects can take years to construct, and investments require certainty from shippers to move ahead. If data center developers pull back, then risker pipeline expansions would be tabled.
EDA will continue to monitor the emerging data center industry in the Data Center Demand Monitor and impacts to the gas market in the Macro Supply & Demand Report. – Ian Heming Tickers: MSFT, TRP.
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