The lure of riches and tight capacity today has money flooding into the construction of artificial intelligence (AI) data centers. Data center construction—just the cost of building the building—has increased to an annual rate of $43.0 billion, up 30% y/y and 322% higher than $10.2 billion four years ago (chart). Add in the costs of chips and servers, and you’re talking about real money.
The irony is that, typically, the more money that floods into an area, the less likely any of the players will make the same juicy profits that attracted them, reaped in the years before the spending boom. Cloud providers like Microsoft, Alphabet, and Amazon enjoyed 20%-30% annual revenue growth rates last year. So it’s understandable that players like Oracle, xAI, Meta, and others would jump into the lucrative market.
One of the biggest users of AI data center capacity is OpenAI. The company—which is expected to generate $13 billion in revenue this year but earn no profit—recently said it was likely to spend around $16 billion to rent computing servers alone this year, and that the number could rise to $400 billion in 2029. And now it too is building data centers for its own use.
Let’s take a look at OpenAI’s grandiose plans and what the competition is doing:
