The Staggering Costs of a Single Data Center, From Land to Chips

SPEAKER_1 (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

SPEAKER_2 (0:08)

You're listening to Bloomberg Businessweek with Carol Massar and Tim Stenovec on Bloomberg Radio.

Ian King (0:15)

All right.

Carol Massar (0:15)

We want to get to one of the most read stories on the Bloomberg terminal today. It is about the staggering costs of a single AI data center from steel, cement, to chips and copper, to land engineering power and more. There's a lot that goes into the costs of those data centers. Increasingly, all of those things cost a lot more than they used to.

Tim Stenovec (0:35)

Okay. But given how expensive everything is, when you add it all up, it's actually not that difficult to see how Meta, Amazon, Microsoft, and Alphabet are spending a whopping $750 billion on CapEx alone.

No. That's at least when you scroll through this story.

Carol Massar (0:50)

Well, you get it. I keep thinking about Mandeep's story and research about the spend next year, about 1.7 trillion and I see this number and you realize how much is really because it is for companies in a big way.

Tim Stenovec (1:06)

Well, Lynn Doan is the byline with an assist from Ian King. Lynn Doan is Bloomberg News managing editor of technology. She used to be out here in New York, now she's out there in California. Ian King is Bloomberg News US Semiconductor reporter. They both join us from San Francisco. Lynn, I just love how you opened this story, contextualizing just how big a number $750 billion is. Can you just lay it out for us?

Lynn Doan (1:30)

Well, first of all, thanks for having me. I miss you all out there in New York. I'm sorry, I have to dial in by Zoom these days. I felt like that $750 billion needed a lot of context. It's just such a massive number, right? As you say, we're talking about heading into the trillion dollar realm next year. So I thought, how can I wrap people's heads around this? I know GDP of a country, yes, it was GDP of all of Ireland, of all of Belgium. It's more than half of what all of the companies in the S&P 500 index spent in total last year. It's enough to cut $5,500 in a check for every household in the US. So it's a lot. I think that the only thing that is comparable to this is build out to the US highway system.

Otherwise, we have never seen such a build out of this enormity dollar wise.

Carol Massar (2:27)

Ian, let's bring you into this because as we know, these data centers, they're complicated. There's a lot of moving parts and a lot of those parts, whether it's power, whether it's semiconductors, increasingly have gone up. I think a lot of it is just basic supply and demand. There's just so much demand that the prices of these things have gone up and it just costs a lot to make them all happen.

Ian King (2:50)

Yeah, that's absolutely right. I mean, you've got to think about it. The main component in these buildings is something that's like a couple of square inches, and you're paying $30,000 for one of those. It's using as much electricity as several large flat screen televisions, and you're putting 72 of those in a server. So imagine the expense of just putting one server there, of feeding it with power for a year.

Obviously, there's more than just one server in these machines as Lynn's, in these giant data centers as Lynn's story really shows very well.

Tim Stenovec (3:26)

Ian, I'm wondering though if this stuff gets cheaper, and remember we have the Oracle force majeure that we saw just a couple of weeks ago.

But look, as we're reminded all the time, the cure for high prices is high prices. If you have a lot of people going after something, more people come off the sidelines and try to give the market those things that are expensive because they want in on the action. Can this stuff get cheaper or is this different?

Ian King (3:53)

Well, the other $30 billion question here is chip plants, right? Cost even more than these things. So you don't just rock up and say, okay, I'll build a chip factory. You can't do that either. It's two years to build a chip plant and we need multiple chip plants to meet the amount of demand that we've got right now. So the problem isn't just a, we can't build enough data centers, it's we can't build enough giant chip plants to feed these data centers with enough components. So it's a compounding issue and there's no real end in sight if demand stays at the current levels. We're just not going to be able to meet it.