Sherwood News

The AI infrastructure debate’s heating up, as spending on data centers set to outpace office construction

Multiple gargantuan data center projects got announced this week — some people see huge risks of fruitless spending, while others, like Sam Altman, think the build-out could be too slow.

Claire Yubin Oh, David Crowther

Depending on who you ask, the AI data center boom is either an obscene waste or not fast enough.

Just yesterday, famed investor David Einhorn cautioned that there’s a “chance that a tremendous amount of capital destruction is going to come through this cycle.” Sam Altman, however, thinks that OpenAI’s hundreds of billions of dollars’ worth of spending will “look slow” in hindsight.

It’s hard to get your head around just how quickly the data center boom is taking off, but a viral chart from Joey Politano helps provide context. Indeed, according to Census Bureau data, construction spending for data centers in the year to July has reached an annualized rate of $41 billion — nearly exceeding the construction costs of all private offices in the US.

That’s a whopping 2,200% increase since July 2014.

With such an attractive alternative, investors are increasingly choosing to build data centers rather than offices, a trend accelerated by the shift toward remote work as many offices empty out postpandemic.

Data center construction spending accelerated after ChatGPT’s launch in late 2022, and the Census Bureau soon started to publish data center expenditure as a separate category. (Until then, data center was, ironically, lumped into the wider “Office” segment.)

Considering the Census Bureau’s annual spending data covers until the end of July, the data likely does not include the latest construction plans, such as the following, to name but a few, suggesting it’s only a matter of time before these two lines cross:

Nvidia and OpenAI’s $100 billion, 10-gigawatt data center megadeal.
OpenAI, Oracle, and SoftBank’s $500 billion “Stargate” project, which just announced the first five of its new data center sites.
Meta’s planned “Titan Cluster” data centers.

Rani Molla2h

T-Mobile and Verizon are seeing strong iPhone sales, too

T-Mobile and Verizon are seeing strong demand for the latest iPhone, according to a note today from Bank of America Global Research:

“As per T-Mobile mgmt., iPhone activations are up double digits (new and existing customers). Verizon mgmt. commentary also suggests strong upgrade activity in its existing base during the quarter.”

This is one of several indicators pointing to a strong upgrade cycle for the redesigned iPhone.

Early this month, a survey of iPhone users found that a higher percentage intended to upgrade than did last year. BofA and Wedbush Securities’ Dan Ives have both cited longer shipment times for the latest model than last year, suggesting relatively higher demand. The Information said that Apple asked suppliers to boost production of the iPhone 17 following strong preorder activity. Bloomberg reported long lines and sold-out phones when the devices went on sale last week. BGR noted today that the iPhone 17 and iPhone 17 Pro are still sold out online in the US.

Last week, Sherwood News reported that web traffic to Apple for the iPhone event and for the preorder period were elevated compared with the past few years, though we suggested that might have more to do with a natural upgrade cycle than features on the iPhone 17.

Waymo Recalls Over 1200 Driverless Cars After Collisions Related To Software

Waymo, Lyft, Tesla: Who’s behind the wheel of the US robotaxi industry?

When it comes to autonomous ride hailing, no company is an island — except maybe Tesla. We mapped out the relationships.

Rani Molla, Max Knoblauch3h

Rani Molla

Big Jump

Ives raises Tesla price target to Wall Street high of $600

The Wedbush analyst said investors are “underestimating the transformation underway at the company” regarding AI.

Rani Molla5h

Report: Meta has discussed using Google’s AI to help with ads

Meta has a huge advertising business, and it wants it to get even bigger with the help of AI, with ambitions to create tools that will help businesses create, place, and track ads with just a quick conversation with an AI chatbot. But it seems the social media company, whose AI models have lagged its competitors and which is spending gobs of money to fix it, might need some help getting there. The Information reports that Meta has been in talks with Google to use the latter’s AI models to improve its ad business.

It may be an interim step for Meta, but it’s a big deal, as The Information notes:

“The fact that Meta is considering using Google’s technology for advertising is striking. Advertising is the engine behind Meta’s $164.5 billion revenue empire, and Meta executives have highlighted improvements to advertising as a top opportunity coming out of the company’s investments in AI.”

Meta in Talks With Google to Use Gemini to Improve Ad Efforts

It may be an interim step for Meta, but it’s a big deal, as The Information notes:

“The fact that Meta is considering using Google’s technology for advertising is striking. Advertising is the engine behind Meta’s $164.5 billion revenue empire, and Meta executives have highlighted improvements to advertising as a top opportunity coming out of the company’s investments in AI.”

Rani Molla22h

Tesla asks Trump not to repeal legal underpinning for carbon emissions rules

Electric vehicle company Tesla would prefer that the government didn’t roll back long-standing emissions rules, according to new comments from Tesla on a proposal to reconsider 2009 findings that said greenhouse gas emissions from motor vehicles contribute to air pollution and could endanger the public.

Tesla wrote:

“The Endangerment Finding — and the vehicle emissions standards which flow from it — have provided a stable regulatory platform for Tesla’s extensive investments in product development and production. This clear regulatory structure has provided incentives for continued innovation in motor vehicle technology and is vital to continued global competitiveness by companies based in the United States.”

Tesla relies heavily on regulatory credit revenues it receives from other automakers that don’t build enough electric vehicles. President Trump’s One Big Beautiful Bill Act signed this summer essentially eliminated the marketplace for such credits, which will cost Tesla about $255 million in revenue each quarter going forward. If the EPA proposal goes through, it would dismantle the foundation for tailpipe emissions rules in the first place.

Tesla urges Trump not to repeal vehicle emissions rules, climate finding