Quick hit: The Reality of Those ‘New’ Data Center Press Releases
It’s one thing to announce a new data center deal, it’s another to actually build the data center.
▶If there is one thing driving this AI bubble more than anything else, it’s the way press release printing presses are working overtime...
Or as Martin Peers wrote in The Information yesterday, “The hardest-working people in tech right now must be the OpenAI team responsible for writing press releases.” There are so many press releases, it’s hard to keep up with the hundreds of billions of dollars being committed..
But if you look at what’s really going on, there’s an enormous disconnect between deals and actual construction. And before you start saying, “Well this is all in the future...” – let me stop you right there. That’s the point. As it almost always does, Wall Street is irrationally extrapolating the number of data centers that will supposedly be built even though nobody – and I do mean nobody – can say when today’s contracts will ever be turned into reality.
It’s like a bricks-and-mortar version of vaporware... when stock-goosing press releases touting new products that didn’t even exist would be issued, complete with press and investor events. Some never even got beyond the development stage.
With data centers, the actual numbers tell a very different story from what’s actually happening....
Just the Fact’s Ma’am
Let’s start with the numbers...
Using data from Aterio, which tracks North American real estate developments, supported by satellite images: At the end of August, there were 2,157 data centers announced, with 500 under construction. That’s against a backdrop of 1,857 active datacenters. That’s roughly 600 more announced data centers – and 100 more under construction – compared with the end of May.
Since the first week of October, the numbers are only slightly higher, but the point is obvious: It’s one thing to announce data centers, it’s another to build them. As Aterio has pointed out in citing various setbacks and project withdrawals, such things as zoning approvals and water constraints can delay or cancel projects... and there already are plenty of delays and even some cancellations.
But There’s Something Else
To get an idea of what’s really happening, I would keep an eye on one very under-the-radar company that in theory should be a good leading indicator...