The investment comes at a time when the market is awash with speculation on just how many billions Microsoft may have wound back on global data centre commitments
Microsoft announced plans to spend ZAR 5.4 billion (about €254 million) by the end of 2027 to expand its cloud and AI infrastructure in South Africa to meet the growing demand for Azure services in the region. This investment builds on the company’s ZAR 20.4 billion (€1.04 billion) investment over the past three years to establish the nation’s first enterprise-grade datacentres in Johannesburg and Cape Town.
The announcement comes at a time when multiple reports have appeared suggesting Microsoft is actually walking away from some of its huge data centre commitments globally. The latest, in the FT, suggested cloud computing company CoreWeave – where Microsoft reportedly represents the majority of its revenue (62%) and has pledged over $10 billion in spending on its services by 2030.
Microsoft has withdrawn from some of its agreements over delivery issues and missed deadlines. For CoreWeave, such reports are potentially existential given it seeking to raise $4bn in an IPO and expected to value the group at more than $35bn.
The Nvidia-backed company hit back, telling Reuters that “there have been no contract cancellations or walking away from commitments. Any claim to the contrary is false and misleading.” Indeed, the FT did report that Microsoft retained a number of ongoing contracts with CoreWeave and it remained an important partner. CoreWeave’s insistence that there are no cancellations would still be true even if Microsoft varied the size of its commitment.
Is the AI bubble bursting?
The latter point is key. TD Cowen analysts published a note last month saying Microsoft had withdrawn from two data centre leasing agreements, citing inquiries with supply chain providers. In response to the Cowen report, Microsoft said its infrastructure spending plans remained on track. But Microsoft chief executive Satya Nadella said in a recent interview that there had been an “overbuild” of AI infrastructure.
Ed Zitron picked up that the TD Cowen report had implied that Microsoft had effectively cancelled over a gigawatt of data centre operations on top of the previously-reported “multiple +100W megawatt deals.” The TD Cowan report puts Microsoft’s move down to “loss of a major demand signal that Microsoft was originally responding to and that we believed the shift in their appetite for capacity is tied to OpenAI.”
Soon after the report came out, Jefferies hosted Microsoft in Australia and the company strongly refuted any changes to its data centre strategy. It instead emphasised that investments are made on a 10 year demand outlook for cloud and AI and as a result, while it may adjust regional forecasts, its core strategy remains intact. Given the recent swingeing Copilot price hikes and the potential price brackets OpenAI has recently been discussing – PhD-level AI agents for $20,000 per month – AI monetisation, at least on the LLM side, makes 5G monetisation look like a walk in the park.
Long-standing presence
The wider AI demand arguments don’t diminish Microsoft’s commitment to invest in the South African economy. In addition to the infrastructure investment, Microsoft said it will expand its digital skills initiative over the next 12 months by paying for 50,000 people to be “Microsoft Certified” in high-demand skills like AI, data science, cybersecurity analysis and cloud solution architecture.
Microsoft said it offers a variety of certifications under the Microsoft Certified umbrella. In 2024, more than 150,000 people were trained in digital and AI skills, 95,000 certified and 1,800 secured employment opportunities through Microsoft’s Skills for Jobs programme.
Microsoft’s new data centre infrastructure will include a big investment in AI infrastructure, populated with GPUs. However, local company reps told media that further details on what the investment may look like will be released in the “coming weeks”. Microsoft opened its South African cloud region in 2019, says it is in the process of building its second cloud infrastructure region in Centurion, to meet the growing demand from public and private sector organisations for cloud and AI services and solutions in Africa.
Image: South African president Cyril Ramaphosa with Microsoft vice chair and president, Brad Smith.
