First, Microsoft tapped the AI data center brakes. Now analysts are worried about Amazon.

• Wall Street analysts say Amazon has paused some data center deals.
• The data center market may be slightly cooling, after a frenzied couple of years.
• Microsoft has also taken its foot off the AI accelerator a bit recently.

First, it was Microsoft. Now Amazon is raising eyebrows on Wall Street as fresh signs suggest the cloud giant may be easing off the accelerator in the race to build AI data centers.

Some analysts are concerned that Amazon Web Services, the dominant cloud provider, may be entering a digestion phase that could slow momentum in the data center market.

The speculation gained traction Monday when famed short-seller Jim Chanos posted on X with a simple and ominous remark, alongside an analyst note suggesting caution around AWS's data center plans.

That note, published by Wells Fargo analysts, cited industry sources who reported this weekend that AWS paused discussions for certain new colocation data center deals, particularly international ones. The analysts stressed that the scale of the pause remains unclear, though they're worried.

"It does appear like the hyperscalers are being more discerning with leasing large clusters of power, and tightening up pre-lease windows for capacity that will be delivered before the end of 2026," the analysts wrote.

Oh no, colo

The same day, TD Cowen analysts published similar findings from their own data center research.

"Our most recent checks point to a pullback in US colocation deals from Amazon," they wrote in a note to investors. Colo deals, as they're known in the industry, involve different companies sharing space in the same data center.

"We are aware of select colocation deals that it walked away from, as well as expansion options that it chose not to exercise," the Cowen analysts added.

They also said that their recent industry checks point to a slowdown in Amazon's AI ambitions in Europe.

"This is a dynamic we will continue to monitor," the analysts wrote.

Three signs of moderation

More broadly, Cowen's analysts have spotted a cooling in the data center market — relative to the frenzied activity of recent years.

"We observed a moderation in the exuberance around the outlook for hyperscale demand which characterized the market this time last year," they wrote, laying out three specific signs of calmer times:

• Data center demand has moderated a bit, particularly in Europe.
• There has been a broader moderation in the urgency and speed with which cloud companies seek to secure data center capacity.
• The number of large deals in the market appears to have moderated.

Some context is important here. The AI data center market has gone gangbusters ever since OpenAI's ChatGPT burst onto the scene in late 2022 and showed the potential of generative AI technology.

These signs of moderation are pretty small in relation to this huge trend. However, trillions of dollars in current and planned investments are riding on the generative AI boom. With so much money on the line, any inkling that this rocket ship is not ascending at light speed is unnerving.

Microsoft made similar moves

These signals from Amazon echo similar moves by Microsoft, which recently halted some data center projects.

"Like Microsoft, AWS seems to be digesting recent aggressive leasing activity," the Wells Fargo analysts wrote.

They clarified that this doesn't mean signed deals are being canceled, but rather that AWS is pulling back from early-stage agreements like Letters of Intent or Statements of Qualifications—common ways that cloud providers work with partners to prepare for data center projects.

Amazon says it still sees strong AI demand

In response to these growing concerns, Kevin Miller, vice president of Global Data Centers at AWS, posted on LinkedIn on Monday to offer some clarity.

"We continue to see strong demand for both Generative AI and foundational workloads on AWS," he wrote.

He explained that AWS has thousands of cloud customers around the world and must weigh multiple solutions to get them the right capacity at the right time.

"Some options might end up costing too much, while others might not deliver when we need the capacity," Miller wrote. "Other times, we find that we need more capacity in one location and less in another. This is routine capacity management, and there haven't been any recent fundamental changes in our expansion plans."

Amazon did not respond to a request for comment from Business Insider.

Digestion or indigestion?

Miller's comments aim to position the pause not as a red flag, but as part of the normal ebb and flow of data center growth.

Historically, these digestion periods, marked by slowing new leases or deferred builds, can last 6 to 12 months before a rebound, the Wells Fargo analysts wrote. Google, for instance, pulled back from leasing in the second half of 2024, only to return aggressively in early 2025, they noted.

The Cowen analysts said Amazon's recent cautious moves to pull back on colocation deals may be related to efforts to increase efficiency across its data center operations. Also, AWS typically doesn't do a lot of colocation deals anyway, preferring instead to build its own data centers, the analysts wrote.

They also wrote that other tech giants, such as Meta and Google, are still aggressively pursuing new capacity.

The bottom line? While AWS appears to be taking a breath, the AI cloud race is far from over. Analysts and investors will watch closely to see whether this pause marks a brief recalibration or a more significant shift in AI strategy.