AI is eating cloud data center costs!

NetworkWorld.com reported that “In the first quarter of this year, the average cost of data center space globally was up 3.3% year-over-year to $217.30 per kilowatt per month, according to CBRE’s latest Global Data Center Trends report. But that modest annual price increase masks brutal regional spikes hammering enterprise budgets: Costs jumped 17.6% in Northern Virginia, 17.2% in Chicago, and 18% in Amsterdam.”  The June 27, 2025 article entitled “Data center costs surge up to 18% as enterprises face two-year capacity drought” (https://tinyurl.com/bdzhvy7d) included these comments about how “AI ate the market”:

The culprit is artificial intelligence. Cloud providers and AI-related companies are racing to lock in space early, leading to historically high absorption, CBRE found. Hyperscalers such as Amazon Web Services, Microsoft, and Google are competing with well-funded AI startups to secure massive capacity blocks, pushing traditional enterprise users to the back of the line.

But industry experts warn the situation may be artificially inflated. “Artificial scarcity is now a structural feature of global data center markets, not just a side effect of real demand,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research. He warns of a “braggawatt” phenomenon where developers file for massive power capacities without confirmed builds.

“The market is behaving more like real estate: Capacity is pre-booked, traded, or flipped, often before a shovel hits the ground,” Gogia noted.

This speculation concern is echoed by other industry analysts.

“Yes, there is verifiable evidence suggesting data center capacity speculation, often termed ‘data center flipping,’ driven by intense AI demand and investor interest,” said Biswajeet Mahapatra, principal analyst at Forrester. He points to warnings from industry executives about an “inevitable bubble” and reports of “fly-by-night” operators entering the market as red flags.

Both experts advise enterprises to scrutinize providers’ power permits and demand technical specifics for “AI-ready” infrastructure claims rather than accepting vague promises.

No surprises here with AI and Cloud!