The artificial intelligence revolution is just beginning.
The talk that AI is just a bubble waiting to burst was sparked by Microsoft abandoning data center projects in the United States and Europe. A top American research firm, TD Cowen, responded to the Microsoft news by saying the cancellations were due to an excess supply of data centers relative to the current demand forecast. However, the news from Microsoft is proving to be an isolated case relevant only to Microsoft’s AI operations.
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This week, three of the leading AI companies, OpenAI, Alphabet, and xAI, Elon Musk’s AI startup, all said the same thing: Demand for AI is incredible. However, they also said demand for new AI models is constrained by a lack of data center capacity.
Earlier this week, OpenAI CEO Sam Altman said ChatGPT, the company’s most advanced AI platform, added a million users in one hour. He added that demand was “biblical.” Users are excited about ChatGPT’s new advanced image generation technology. Alphabet’s newest AI model, Gemini 2.5, also opened to spectacular commentary. Musk’s xAI Grok is now at the top of iPhone app download charts, trailing only ChatGPT.
The three companies said their data centers are overwhelmed by demand, and their AI chip supply is insufficient to meet demand. (Open AI and xAI Grok AI platforms run on semiconductors designed by Nvidia.) Still, this only underlines how the AI investment complex looks fantastic, and the companies involved in building and powering data centers appear to have “open runways” to faster growth.
While financial markets, economists, and politicians are fixated on President Donald Trump’s tariff policies, the country’s most advanced technology companies continue to invest to maintain global supremacy in AI. Importantly, the Trump administration is pro-economic growth and pro-technology and strongly supports the rapid development of AI.
The Trump administration is committed to accelerating the permitting and construction process for AI data centers. That matters because, in 2024, data center construction increased by 69% over 2023 construction rates. Yet three of the global leaders in AI said capacity is vastly insufficient. Data center vacancy rates are at a record low, just 2%.
Today, 78 data center facilities are under construction, with an investment cost of $9 billion. A data center boom is underway. Meta and Oracle are rushing to build new AI-focused data centers. Oracle’s data center in Salt Lake City is large enough that eight Boeing 747s could fit inside it. Meta’s new data center will be 715,000 square feet.
There are many obstacles to accelerating the build-out of AI data centers. The facilities need large amounts of power, and they are electricity-hungry. The AI companies plan to power their new data centers through nuclear power, natural gas energy, and renewables. The Trump administration’s commitment to cheap energy and expedited permitting approvals for new energy projects is critical to maintaining American supremacy in AI.
However, the data center construction industry faces severe workforce shortages. The U.S. does not have a sufficient supply of skilled labor necessary to build and operate the new data centers coming on line. And, of course, even in a country as large as the U.S., finding land to build new data centers on is a constant challenge. After suitable real estate is purchased, the slow process of local zoning regulations and permitting challenges delays the start of new AI data centers.
STOP PRETENDING REPUBLICANS ARE CUTTING THE DEFICIT
Unfortunately, the Trump administration’s tariff policies will almost certainly create supply chain problems that will impede the rapid expansion of American data centers.
Regardless, U.S. policy must support AI global supremacy. That means the Trump administration must do everything in its power to remove all roadblocks against the construction of new AI data centers.
The writer owns shares in Nvidia and Meta.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected].