Tech Giants Adjust Course: Amazon Abandons Ambitious AI Data Center Blueprints, Echoing Similar Moves by Microsoft
Barnacle-minded tech titans Amazon and Microsoft are hitting the brakes on their AI data center expansion plans, as reported by banking heavyweights Wells Fargo and TD Cowen. Amazon, according to these financial giants, has put the kibosh on some co-location data center deals, primarily in Europe. This news arrives soon after whispers of Microsoft doing the same with its own plans.
As the cat's outta the bag, it's unclear how long this break will last. A Wells Fargo report suggests they're merely "digesting aggressive recent lease-up deals," with Amazon still forging ahead on existing contracts. Co-location, for the uninitiated, is an ingenious partnership where companies pool resources by building data centers together to share enormous infrastructure costs.
It's worth noting that other companies, such as Meta and xAI, aren't holding back - they're still charging full steam ahead in building out their data centers to fuel their AI models. Expanding data centers requires a hefty dose of power, something grids have been struggling to supply. Amazon, with its existing data center infrastructure already boasting 9 GWs (gigawatts) of active power capacity, might need more time to get the ball rolling on centers already under construction.
The bean-counters in the crowd might be taking note, given that demand for AI infrastructure seems to be cooling off as businesses grapple with figuring out how to make the new tech a time and money-saving powerhouse. To make matters worse, President Trump's trade war has sent stocks tumbling, with Amazon taking a 24% hit this year. The company is also vulnerable to tariffs on Chinese goods, with estimates suggesting over 70% of items on its namesake marketplace hail from the Middle Kingdom.
In response to the roaring gossip, Kevin Miller, a vice president of global data centers at Amazon Web Services, took to LinkedIn to clarify that Amazon is exploring multiple options and that it's par for the course for them to alter their server infrastructure plans based on evolving needs.
This pause has economists stirring their craniums, wondering if the trade war and potential recession could put a damper on the AI gold rush. If major players like Nvidia, which relies on China for a chunk of its business, find themselves caught in the crossfire, it could mean tough times for sellers of AI-friendly chips. If Amazon scales back on new data centers, that's more bad news for Nvidia's bottom line.
As we edge towards May 1st, when Amazon will report its next earnings, investors are barking at the moon to get a peek at how the AI market is shaping up. With tech giants investing billions into AI infrastructure and eager to keep up the optimistic vibe, we'll just have to wait and see if the rumors of phantom AI infrastructure are here to stay or if this is all just a well-timed bluff.
The tech world recently witnessed a $1 billion data center project in Ohio getting the cold shoulder from Microsoft, much to the chagrin of local officials. Microsoft has also skipped over leasing more capacity from CoreWeave, a provider of data centers tailored for AI. CEO Satya Nadella has attempted to set expectations straight, stating that the tech revolution hasn't yet produced a meaningful lift for the U.S. economy.
OpenAI points the finger at ChatGPT, boasting that it caters to over 400 million weekly active users. But alas, many AI offerings are far from living up to the hype they generate. Microsoft's Copilot has faced harsh criticism for not delivering much value for the extra cost and resources required for enterprise use.
On the bright side, locals won't have to cough up as much in taxes for the cancelled projects. The other shoe drops, though, since abandoned projects once employ a lot of construction workers during rollout, and many have hoped that the data centers' demands would finally spur local municipalities into upgrading fraying infrastructure and building out clean energy. Alas, it seems we'll have to wait a bit longer for AI to provide something tangible beyond user-friendly chatbots that stumble over common questions or surreptitious Palantir-powered law enforcement systems.
- Despite Amazon and Microsoft pausing their AI data center expansion plans, other tech companies like Meta and xAI continue to expand their data centers to fuel their AI models.
- With demand for AI infrastructure seemingly cooling off, economists are speculating whether the trade war and potential recession could dampen the AI gold rush, impacting brands such as Nvidia that heavily rely on China for their business.
- Gizmodo's report on the cancellation of a $1 billion data center project in Ohio highlights the concerns over the future of AI-focused technology projects and their impact on local economies and infrastructure development.
