According to the Wall Street Journal, tech companies are earmarking absurd sums for massive data centres, but the AI building spree is running into the boring stuff like supply chains, permits and power.
A JPMorgan analysis found that more than 60 per cent of data centre capacity planned for completion in 2027 is not yet under construction. Another seven per cent is already delayed.
That leaves a strange problem for the cocaine nose-jobs of Wall Street. Hyperscalers can raise mountains of cash, but they cannot always turn it into buildings with blinking lights. Google’s cloud outfit, which brought in $20 billion in first-quarter revenue, is trying a different trick.
It has been securing its own power generation and investing in systems that shift computing loads to follow available electricity. Analysts and power industry types reckon that could help Google connect data centres to the grid faster than rivals.
Microsoft, Alphabet, Meta Platforms and Amazon spent $410 billion on capital expenditure last year. They are expected to burn through more than $670 billion this year.
Google said its AI needs were behind Monday’s deal for Berkshire Hathaway to buy $10 billion in shares. It plans to sell another $70 billion through various routes this year. Alphabet shares fell 3.9 per cent on the news. The company has lost $340 billion in market value over three trading sessions, its biggest three-day loss on record.
MoffettNathanson analyst Michael Nathanson said the announcement was a surprise from a company that normally issues debt to raise cash.
“The fact that they had to raise equity really makes you wonder about the intensity of the capex needs over the next couple of years,” he said.
The main headache is getting grid operators and power companies to approve data centre connections.
Some of these facilities use as much electricity as a midsize city, which is awkward when the grid is already wheezing during hot or cold weather.
University of Texas at Austin energy expert Josh Rhodes said uncertainty has clogged the system.
“Because of how much uncertainty there is about how many data centres are real, about how much load is going to be connected, it has kind of paralysed a lot of the processes,” Rhodes said.
This year, Google became the only tech giant to own a power company after buying Intersect for $4.75 billion. Intersect is a wind and solar developer with projects under development to supply multiple gigawatts of electricity.
On-site power is becoming a strategic edge for tech companies. Regulators are considering whether data centres built beside new power sources should get faster grid connections.
xAI, OpenAI and Meta have built or proposed data centres powered by on-site gas generation. xAI’s Colossus data centres near Memphis partly use gas turbines, annoying residents and policymakers worried about air pollution.
Other tech giants are betting on nuclear power. Microsoft struck a 2024 deal with Constellation Energy to restart the undamaged reactor at Three Mile Island, and federal regulators this week cleared part of the plan.
That does not magic away every bottleneck. JP Morgan said delays in gas turbines and electrical transformers are helping push data centre projects further behind.
Google has spent years testing how data centres might cut power use when the grid is strained. It now has utility pilot programmes that pay it to reduce demand.
Google announced a three-year deal with demand response outfit Voltus to create more capacity in PJM, the US’s largest power market. The companies claim the plan could create up to 100 megawatts of capacity, roughly the size of a small power plant.
