Amazon Sets $148B To Expand Data Centers

Amazon.com Inc. plans to spend almost $150 billion in the coming 15 years on data centers, giving the cloud-computing giant the ability to handle an expected explosion in demand for artificial intelligence applications and other digital services.

TakeAway Points:

  • Amazon intends to spend $150 billion on data centers in the coming years.
  • Amazon’s data center expansion is geared towards meeting a rise in demand for corporate services like file storage and databases. 
  • The company plans to expand existing server farm hubs in northern Virginia and Oregon as well as push into new precincts, including Mississippi, Saudi Arabia and Malaysia.

Data Center Expansion

The spending is a show of force as the company looks to maintain its grip on the cloud services market, where it holds about twice the share of No. 2 player Microsoft Corp. 

Sales growth at Amazon Web Services slowed to a record low last year as business customers cut costs and delayed modernization projects. Now spending is starting to pick up again, and Amazon is keen to secure land and electricity for its power-hungry facilities.

“We’re expanding capacity quite significantly,” said Kevin Miller, an Amazon Web Services vice president who oversees the company’s data centers. “I think that just gives us the ability to get closer to customers.”

Over the past two years, according to a Bloomberg tally, Amazon has committed to spending $148 billion to build and operate data centers around the world.

The company plans to expand existing server farm hubs in northern Virginia and Oregon as well as push into new precincts, including Mississippi, Saudi Arabia, and Malaysia.

The Roadmap

Amazon’s planned outlay on server farms dwarfs the public commitments from Microsoft and Alphabet Inc.’s Google, though neither company discloses data center-related spending as consistently as Amazon. Microsoft and Google spokespeople declined to provide comparable figures and added that each company likely includes different costs in their estimates.

Amid broader cost-cutting, Amazon Web Services’s capital expenditures on data centers shrank 2% in 2023—for the first time—even as Microsoft increased its own spending by more than 50%, according to the research firm Dell’Oro Group.

But Amazon’s chief financial officer said last month that capital expenditures would increase this year to support Amazon Web Services growth, including AI-related projects.

Much of Amazon’s data center expansion is geared towards meeting a rise in demand for corporate services like file storage and databases. But the facilities, along with advanced and expensive chips, will also provide the computing power required for an expected boom in generative artificial intelligence.

Generative Text Market

Microsoft’s close partners, OOpenAI, and Google, are widely seen as leaders in commercializing software capable of generating text and insights. But Amazon is building its own tools to rival OpenAI’s ChatGPT and has partnered with other companies to power artificial intelligence services with its servers. As a result, Amazon expects to reap tens of billions of dollars in related revenue.

Previous Data Centers

Amazon Web Services put its first server farms in Virginia, on the fringes of metropolitan Washington. Home to the first commercial interchange for web traffic, the area remains a crucial hub for video streaming and corporate and government data. Amazon later opened data centers in rural eastern Oregon, taking advantage of cheap hydroelectric power and ample tax breaks.Virginia and Oregon have since received about four of every five dollars Amazon Web Services spends on U.S. infrastructure.