Microsoft announced today that it will expand its data center capacity in Europe by 40 percent over the next two years. The tech giant wants to be a “voice of reason” in the tense relationship between the US and the EU. At the same time, it has scaled back its plans in the US.
Globally, Microsoft Azure is the second-largest hyperscaler after AWS. However, the presence and adoption of Microsoft services (from Windows to 365, Office, and Azure) in certain European countries is almost unattainable. There is definitely interest to be found in Europe for new data center capacity. However, network congestion is a stumbling block for both Microsoft and other parties with data center plans.
In any case, Microsoft’s announcement is a signal that, as an American company, it wants to embrace Europe. This contrasts with the current US administration under President Trump, whose varying plans for tariff barriers have made Europeans even more uncertain about their dependence on US services and products. This was already happening to a lesser extent during Trump’s first term and before, when US laws began to interpret the country’s jurisdiction in an increasingly broad manner.
Conciliatory tone
The new Microsoft plans include expanding activities in sixteen European countries. President Brad Smith was sent to Brussels to unveil the plans in person. Smith opted for a conciliatory tone, according to Politico. “We understand that European laws apply to our business practices in Europe, just as local laws apply to local practices in the United States,” Smith stated, referring to EU legislation that constrain tech companies from acting in the same way as in the US.
Microsoft wants to be a “voice of reason” that promotes “stable” ties between the US and Europe. We’re not hearing the usual reluctance here that we’ve gotten used to among American vendors, who often consider EU laws too strict and restrictive. Take Google and Meta, for example – both are keeping Europe waiting for new AI developments time and again, and often point directly to AI legislation or decry competition laws.
The announcement is in line with the ambitions of the European Commission, which wants to triple the EU’s data center capacity within five to seven years. This is seen as a crucial part of the plan to remain competitive in the global AI race. After all, training AI models requires enormous computing power and storage capacity. Once again, the question is how this can be achieved given the current network congestion and delays in the construction of new substations. Microsoft probably has the capital and persuasive power to realize many of the plans after all.
Conflicting visions
Despite Microsoft’s commitments, the company could be on a collision course with a growing movement pushing for a European technological infrastructure. There are increasing calls from European governments for a sovereign cloud. Opinions differ on how European (or rather, how non-European) this should be. AWS and Azure, in particular, are offering increasingly competitive sovereign offerings that provide every possible guarantee that the US government cannot access the data of governments or EU citizens.
In any case, the expansion plans come at an interesting time for Microsoft. Earlier this year, it was announced that Microsoft had put several data center projects on hold worldwide, including in Indonesia, the UK, and Australia. The reasons for this vary from disappointing demand for AI services to challenges with local power supply. This is not so different from the situation in Europe, unless Redmond has discovered more internally about the pressing AI issue that is said to be more prevalent among Europeans than elsewhere. We have not been able to detect this in other independent studies, so it remains speculation.
Now that Microsoft seems to be more cautious about large-scale data center investments worldwide, it is telling that the company wants to expand significantly in Europe. If the plans become reality, this will mean a real shift in the company’s orientation. Meanwhile, former AI partner OpenAI is focusing almost entirely on the US through its ambitious Stargate project for a nationwide expansion of AI capacity.
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