Microsoft to Drop $80B to Build AI-Enabled Data Centers in 2025

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Microsoft (MSFT) is taking a proactive approach to data storage space in the coming year.

The tech company announced it would be investing $80 billion of its budget for the fiscal year 2025 on building data centers specifically geared toward handling the rigors of artificial intelligence, with over half of that set to be spent in U.S. markets.

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The data centers will help Microsoft train artificial intelligence models and deploy AI and cloud-based applications globally, the company’s vice chair and president Brad Smith announced Friday.

“Today, the United States leads the global AI race thanks to the investment of private capital and innovations by American companies of all sizes, from dynamic start-ups to well-established enterprises,” Smith wrote in a blog post. “At Microsoft, we’ve seen this firsthand through our partnership with OpenAI, from rising firms such as Anthropic and xAI, and our own AI-enabled software platforms and applications.”

Some changes in the technology industry driving the need for these specific types of data centers are newer AI models that are moving away from graphics processing units to AI accelerators with tensors, according to Microsoft.

Demand for information storage space has skyrocketed in recent years with the data center market doubling in capacity since 2020, JLL said in an August report. Occupancy rates have increased by 30 percent over the last four years and vacancy rates are expected to be averaging 3 percent by the end of the first half of 2024, the report found.

As to be expected with such demand, asking rents for data centers have increased between 13 and 37 percent year-over-year, according to JLL.

While Northern Virginia has been the king of the data center market, developers have been going farther afield to quench the thirst for storage space, building in markets such as Dallas, Austin, Houston, San Antonio, Central Washington, Omaha, Neb., Reno, Nev., Atlanta and Phoenix.

Mark Hallum can be reached at mhallum@commercialobserver.com.