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Amazon to Spend $148 Billion on Data Centers

Amazon.com Inc. intends to spend almost $150 billion on data centers over the next 15 years.

Amazon to Spend $148 Billion on Data Centers

The mentioned plan of the e-commerce giant, which expands the scope of its activities by starting a history of presence in new industries, if successfully implemented, will allow the company, which owns significant cloud computing capacity, to gain incredible power to meet the expected growth in demand for artificial intelligence apps and other digital services.

The increase in costs is also a kind of demonstration of Amazon’s strength, including a symbolic action in the context of improving its reputation, which is already stable and does not face any threats. The company signals its desire to maintain its strong position in the cloud services market, where its share is twice that of Microsoft Corp. This fact is an example of how starting an activity in an unknown space, in the case of perseverance and a desire to achieve a result, allows anyone to conquer a territory that seemed to be a system consisting of exclusively unknown elements.

Last year, Amazon Web Services (AWS) faced a drop in financial performance. The deterioration of the mentioned results is due to the fact that, against the background of a difficult macroeconomic situation, business clients began to reduce spending and postpone modernization projects. It is worth noting that these circumstances did not have an impact on AWS’s market position, since the formed situation affected the entire cloud services industry. Currently, a rebound of consumer activity is being recorded.

Amazon, which also owns the best American delivery service, aims to secure land and electricity for its power-energy facilities. Kevin Miller, vice president of AWS, who oversees the company’s data centers, talks about a significant expansion of the capacity of this business. According to him, the current efforts will allow the company to become closer to customers.

According to preliminary media estimates, over the past two years, Amazon has committed to spend $148 billion on the building and operation of data centers around the world. The company intends to expand its existing server farm hubs in Virginia and Oregon. Amazon also plans to launch this business in new territories, including Mississippi, Malaysia, and Saudi Arabia.

The company’s planned spending on server farm hubs significantly exceeds similar public commitments by Microsoft and Google related to data centers.

It is worth noting that Amazon is implementing a large-scale financing strategy in the context of its activities in the cloud services industry, but has been cutting costs recently. For example, AWS capital expenditures on data centers decreased by 2% last year, as evidenced by information from the research firm Dell’Oro Group. At the same time, in February, Amazon CFO Brian T. Olsavsky said that in 2024 the mentioned figure would increase. According to him, the main goal in this case is to support AWS growth, including projects in the artificial intelligence industry.

Most of the expansion of Amazon’s data centers is aimed at meeting the growing demand for corporate services, including file storage and arrays of information. The facilities, along with advanced and expensive chips, will provide the enormous computing power needed to scale the so-called artificial intelligence boom later.

Microsoft, OpenAI, and Google currently have the status of leaders in the sphere of commercialization of software that is capable of generating text and insights. Amazon is nowadays developing its tools that can compete with the products of the mentioned companies. Moreover, an e-commerce giant that has become an active player in the technology sector, is collaborating with other firms to ensure the functioning of artificial intelligence services on its servers. Amazon expects that the implementation of AI-related projects will generate revenue in the amount of several tens of billions of dollars.

AWS put its first server farms in Virginia. The first commercial interchange for web traffic is located here. Virginia remains Amazon’s crucial for video streaming and corporate and government data.

The company also opened functional data processing facilities in Oregon. In this case, the company took advantage of cheap hydroelectric power and amble tax breaks. Media reports indicate that Virginia and Oregon currently receive about four out of every five dollars that AWS spends on infrastructure in the United States. The company intends to increase investments in these regions, but at the same time faces an increasing problem of secure electricity there. The process of operation of data centers involves the intensive use of significant amounts of energy. The increase in the number of such facilities increases the pressure on utilities.

For several months in 2022, Dominion Energy Inc., which powers Virginia’s data center alley, could not keep up, suspending connection to facilities. This firm expects the workload to double over the next 15 years. Dominion Energy predicts that growth will be driven primarily by data centers.

In Oregon, the amount of electricity consumed by Amazon server farms is greater than the share of local utilities in hydroelectric power, which is why it has to buy electricity generated by natural gas. This was reported by the media in the current year.

Ali Greenwood, Executive Director of the data center practice Cushman & Wakefield, the commercial real estate firm, says that currently, utilities need to occur upfront and detailed planning to understand how real the project is, because the current level of demand is very high.

In February, Amazon announced its intention to spend about $10 billion to build two data center campuses in Mississippi. In March, the operator of a 40-year-old nuclear power plant on the Susquehanna River in Pennsylvania released information that AWS had agreed to spend $650 million to acquire a data center campus connected to the facility.

In Round Rock, Texas, Amazon has received zoning approval. In this region, it is planned to build a data center and an electric substation next to a delivery depot on the slice of a former ranch.

In recent years, Amazon has become the world’s largest corporate buyer of renewable energy. The company has committed to power all its operations with electricity of the mentioned category by 2025.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.