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Data centers are sprouting up as a result of the AI boom, minting fortunes, sucking up energy, and changing rural America

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Oct 22, 2023, 3:01:59 AM10/22/23
The AI boom has triggered a surge in spending on data centers.

These data centers require billions of dollars of investment and huge
amounts of energy.

It's putting pressure on local utilities and has made rural America a
hotbed for building.

It's less than a year since ChatGPT launched to the public, triggering a
boom in artificial intelligence investments, and forever changing our
comprehension of the technology.

And while the rise of AI has already changed our digital realities, it's
also beginning to impact our physical world, too.

The AI boom has supercharged a wave of spending on data centers. This
building boom is sucking up billions of dollars, along with water, land,
and energy.

"There's a well-publicized arms race happening in AI, and the major tech
companies are expected to invest $1 trillion over the next five years in
this area, mostly to data centers," Jonathan Gray, Blackstone's president
and chief operating officer, said on an earnings call on July 20.

The data center boom is set to double or triple the amount of energy
consumed by these data centers.

By 2030, data centers are expected to reach 35 gigawatts of power
consumption annually, up from 17 gigawatts last year, according to
McKinsey. A recent Cowen research report estimated that AI data centers
could require more than five times the power of traditional facilities.

"It's staggering," said Marc Ganzi, CEO of DigitalBridge, an investment
firm that owns and operates data centers, fiber networks, and other tech
infrastructure. "Not sure how we do it."

Insider has been covering the data center boom at length. Here, we break
down what's going on:

AI is supercharging the data center boom

AI model training is especially energy intensive. It requires the use of
graphic processing units. These GPUs are specialized chips that multitask
better and work faster than central processing units, or CPUs, which run
most traditional cloud services.

AI computer servers being installed in data centers are often equipped
with multiple GPUs, usually supplied by Nvidia. Each GPU consumes up to
about 400 watts of power, so one AI server can consume 2 kilowatts. A
regular cloud server uses 300 to 500 watts, according to Shaolei Ren, a
researcher at UC Riverside who has studied how modern AI models use

For instance, the power consumption of Nvidia's new GH200 server cluster
is about two to four times more than a regular cluster of the same
physical size, he estimated.

Tom Keane, who oversaw Microsoft's cloud data centers for about two
decades, recently warned about this. Microsoft is the main backer of
OpenAI, creator of ChatGPT and builder of the most powerful AI models

"In the case of a training data center, you make that as big as possible,
you put as many computers in there as possible and you're running that
data center at full utilization all of the time," Keane told Bernstein
analyst Mark Moerdler in a recent interview. "That physical data center
starts to become more resource intensive. You start to design that AI data
center very differently."

Why generative AI will have a huge impact on data centers.

Rural America has become a hotbed

On a rolling expanse of rural Ohio land, America's digital future is being

Last year, a partnership between the real estate investors Lincoln
Property Company and Harrison Street purchased 190 acres in New Albany, a
small city about 20 miles outside of Columbus where the pair plan to begin
construction on a 200-megawatt data center by the end of the year.

The project's neighbors include Google, Meta, Microsoft, and Amazon – all
of whom have similar plans, or are already underway with major data center

"Our regional message is if you're a major data center developer or
customer, we want to talk to you," said Matt McCollister, an executive
vice president at One Columbus, a business development group in the

The data center industry has long been clustered in a handful of well-
established markets, primarily Northern Virginia, Dallas, Phoenix, Silicon
Valley, and Chicago. But the emergence of places like New Albany shows how
soaring demand and the sector's voracious appetite for energy is
increasingly pushing data center developers and users throughout the

Artificial intelligence, which requires massive computing power and energy
loads, is expected to further this migration – especially as utilities in
the industry's core markets have struggled to keep pace with its growth.

Rural America is the new hotbed in the AI race as tech giants spend
billions to turn farms into data centers

Wall Street is betting big

To help it reach $1 trillion in assets, Blackstone has wagered big sums on
apartment buildings, warehouses, student housing, and other commercial
real estate assets that proved to be shrewd investments.

Now, as borrowing costs rise, property values sink, and a once-soaring
real estate market has become perilous, the investment giant is turning to
ChatGPT for answers — literally.

Blackstone has been talking up data centers with expectations that the
industry will benefit from a boom in artificial intelligence and become a
key new area of focus in its $585 billion real estate portfolio.

Two years ago Blackstone funds, including its largest single real estate
fund, Blackstone Real Estate Income Trust, known as BREIT, took the data
center landlord and developer QTS Realty Trust private in a $10 billion
deal that has made QTS the centerpiece of its data center ambitions.

Blackstone executives have said QTS's value has since tripled and that
they plan to radically scale it beyond that with $8.5 billion of new data
center projects due in the next three years and a $50 billion pipeline of
longer-term development.

Inside Blackstone's data center gamble

These complexes are hoovering up huge amounts of energy

Just a few miles from the $5 billion second headquarters that Amazon is
raising outside of Washington, DC, the tech giant is in the midst of a far
larger, and less conspicuous, building boom.

The company is in the process of developing $87 billion worth of data
centers, a push that has already made it the biggest player in the world's
largest data center market in northern Virginia. The featureless,
warehouse-like structures are easy to miss on the sides of highways or
tucked unassumingly amid suburban neighborhoods.

Data centers, including Amazon's, play an increasingly central, but unseen
role in modern life, housing the digital infrastructure that powers
critical functions such as e-commerce, autonomous vehicles, video
streaming, and, now, artificial intelligence.

There is a flipside, however, to their now ubiquitous presence in places
like northern Virginia. The facilities consume quantities of power so vast
that they have begun to tax entire energy grids and could exacerbate the
climate crisis.

Amazon does not disclose how many data centers it occupies, where they are
located, or how much electricity they consume. The company's data
facilities are tied to its large cloud computing business, Amazon Web
Services, which offers software, storage, and other services to legions of

Based on a review of permits that Insider obtained through a Freedom of
Information Act request, Amazon operates, or is in the process of building
or planning, 102 data centers in northern Virginia. Together, the
facilities, when they are all up and running, will have emergency
generators capable of producing more than 4.6 gigawatts of power. That's
almost enough backup electrical capacity to light up all of New York City
on an average day.

Amazon built a data center empire in northern Virginia. Exclusive filings
reveal it's using as much energy as a major city.

That's forcing some utilities to delay their shift away from fossil fuels

In Phoenix and the surrounding region, data centers have attracted
attention for the noise they blare, the water they guzzle, and the large
tracts of land they've consumed.

Now, the prodigious power burned by this fast-growing industry threatens
to overwhelm the city's utilities and stymie efforts to remove fossil
fuels from the grid even as the climate crisis has flashed increasingly
dire signals. This year, the daily high temperature in Phoenix reached or
surpassed 110 degrees Fahrenheit for a record 54 days.

"We have about 7,000 megawatts of data center requests currently in our
pipeline," Karla Moran, an executive at Salt River Project, one of two
major utilities that serve the Phoenix region, told Insider. Moran noted
those requests rivaled the size of the utility's entire 11,000 megawatt

While all of those power requests are not expected to materialize into
actual development, she said the size of the interest was unprecedented.
The data center industry's soaring electrical demand has been so
significant, it factored into the utility's far-reaching plans, Moran

In October, the power company, better known as SRP, approved a significant
expansion of its generating capabilities that includes the development of
2,000 megawatts of new methane gas facilities. Those plants will
effectively preserve the size of its portfolio of fossil-fuel-fired
infrastructure into the next decade and potentially beyond.

Moran said data centers, with their heavy, around-the-clock power use,
were "one of the main reasons we look at having a resource like that."

Data centers are booming. Their need for power is causing utilities to
retreat on green energy.
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