WSS: AI infrastructure demand, growth still pushing forward despite perceived challenges
The sector continues to push forward and the recent earnings season reflected the overall health of compute infrastructure growth across hyperscale, webscale and AI infrastructure platforms. The AI infrastructure segment has been very active in the past several weeks. OpenAI received a significant investment from Amazon and in turn, made a substantial increase in its commitment to the AWS cloud, expanding its deal to well over a $100b commitment. The deal is about obtaining capacity but also diversifying with chip vendors. OpenAI continues to show strong revenue growth and there was reporting in the past week revealing how much revenue it is generating, while details about Anthropic’s growth emerged as well. OpenAI is of course burning a lot of cash to build out the infrastructure to support this level of demand and growth. And this continues to raise concerns among skeptics worried about a bubble, and the fact that OpenAI and Oracle Cloud are not expanding further at the Stargate data centre in Abilene, Texas operated by Crusoe, raised more than a few eyebrows. There is more to the underlying story here as there are a number of dynamics in motion. We have details and some perspective.
The growth of the AI infrastructure continues to prime the data centre colocation demand pipeline. Self-build continues to be an option that is a challenge to data centre operators, but it is not cut and dried in all cases as we have discussed in various commentary. And while the likes of CoreWeave are moving to self-build, this is more incremental, situational and strategic. The market is still in a place where go-to-market speed is critical and colocation operators with inventory continue to see strong demand signals. CoreWeave’s management made some notable comments about its build versus lease strategy, and it is clear that leasing is still going to be a big part of the data centre infrastructure puzzle. CoreWeave also continues to evolve its cloud infrastructure platform. In the past weeks, it introduced new consumption models that give end users more flexibility when it comes to cloud infrastructure procurement and usage.
Compared to CoreWeave, Google not surprisingly has a more developed data centre self-build strategy. It is building a data centre near Detroit, Michigan and is working with various US-based utilities to obtain and deliver energy on more flexible terms to respond to fluctuations in demand and usage. And ultimately, this will allow Google to procure more energy and get faster grid connections, while easing strain on the grid and ultimately, consumer prices. The agreements Google signed are for more than 1GW of potential capacity.
There was some strategic activity of note in the last last week. Digital Realty has made acquisitions in multiple European markets lately (Bulgaria and Portugal), and is now expanding into Milan, Italy, acquiring land banks for development. Meanwhile, Nscale in the UK acquired AIPCorp and its land and energy resources to enable a large campus build in West Virginia. Nscale is building a gigawatt-level facility here for Microsoft. The recent strategic activity was focused on Europe. Norway’s Lefdal Datacenter brought in a new minority owner and APG acquired a stake in NorthC.
Finally, there continues to be significant capital raising activity as operators build inventory to meet the high levels of demand out there in the market. Canada’s eStruxture raised CA$150m to support developments projects in Canada, while Core Scientific closed on $500m from JPMorgan Chase and Fleet Data Centers closed on secured notes for its Reno, Nevada data centre project.
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