Tech Giant Amazon Abandons Extensive AI Data Center Aspiration, Mirroring Microsoft's Move
The tech titans Amazon and Microsoft dial back on their AI data center expansion plans, raising concerns
In a surprising turn of events, it seems like two tech giants - Amazon and Microsoft - are hitting the brakes on their ambitious AI data center expansion plans. According to reports from banks Wells Fargo and TD Cowen, Amazon has momentarily suspended negotiations for some co-location data center deals, particularly in Europe. This move comes after similar reports about Microsoft's pause or cancellation of certain plans.
The degree of Amazon's pause isn't entirely clear, but a Wells Fargo report suggests it's much like what they've heard from Microsoft - they're taking a moment to digest recent growth deals. There's no denying, though, that Amazon is still moving forward with deals that have already been signed.
Co-location, in a nutshell, is a cost-sharing strategy where companies build data centers in partnership to spread out enormous infrastructure expenses. Despite this pause, other companies like Meta and xAI continue to aggressively expand their data centers to fuel their AI models.
Building data centers on a massive scale requires a significant amount of power, which grids have struggled to provide in certain regions. It might be that Amazon needs more time to open data centers that are already under construction. The Wells Fargo report indicates that Amazon already boasts 9 gigawatts (GWs) of active power capacity in its existing data center infrastructure.
This news adds fuel to the fire concerning the cooling demand for AI infrastructure as businesses continue to grapple with finding ways to utilize the new technology to save time and money. As if that's not enough, President Trump's ongoing trade war is causing stocks to plummet. Amazon has taken a hit this year, slipping by 24%, and the company is exposed to tariffs on China, with estimates suggesting more than 70% of goods on its marketplace come from China.
In response to the Wells Fargo report, Kevin Miller, a vice president of global data centers at Amazon Web Services, posted a LinkedIn message stating that Amazon is considering various options in parallel, routinely changing plans based on evolving needs.
The trade war and potential recession have economists worried that it could slow down the AI boom, with major players like Nvidia in the crosshairs. This company derives a significant portion of its business from China and is under scrutiny for potentially turning a blind eye to high-end chips evading sanctions and ending up in China. If Amazon reduces its investment in new data centers, it could affect Nvidia's sales of chips.
Amazon will report its next earnings on May 1st, shedding light on the state of AI demand. It's crucial to remember that all of big tech has invested heavily into AI infrastructure and has a motivation to maintain an optimistic outlook. However, Microsoft recently shelved an ambitious $1 billion data center project in Ohio, causing concern among local officials who offered generous tax incentives to secure the deal, despite worries about employment levels and resource consumption.
There's been some disappointment about the practical applications of AI to date. OpenAI has declared that ChatGPT has more than 400 million weekly active users, but many AI products underdeliver compared to the hype surrounding them. Microsoft Copilot, designed for enterprises, has been criticized for delivering little value for the additional cost and resources required to get it functioning on internal systems.
On the positive side, the cancellations could mean lower taxes for locals. On the flip side, cancelled projects can impact construction jobs, and there was hope that the demands of data centers would prompt local municipalities to upgrade their infrastructure and build out clean energy. There was a glimmer of hope that AI might provide something of immediate practical value - if not chatbots that still get things wrong or Palantir-based police state systems.
- The pause in Amazon and Microsoft's artificial-intelligence (AI) data center expansion plans contributes to concerns about the future of AI technology, particularly in the tech industry.
- Gizmodo reports suggest that other technology companies, such as Meta and xAI, are actively expanding their data centers, aiming to fuel their AI models in the coming days.
- datacenter expansion plans by tech giants Amazon and Microsoft stir debates about the actual value of AI, with numerous products not living up to the hype surrounding them in the tech-savvy data-and-cloud-computing sector.
