Data Center Rundown: February 2025

26 February 2025

As February 2025 wraps up, let’s catch up on what’s been happening in the data center industry. From big industry shake-ups to game-changing projects, this month has been packed with news. I’ve rounded up the top stories you won’t want to miss – so get comfy, and let’s dive!

What’s in this instalment:

• Microsoft cancels several data center leases
• Elon quietly develops second mega data center
• CDC secures $17bn valuation
• London faces substantial grid constraints
• And more!

Let’s get into February's data center rundown.

Microsoft Reassesses Data Center Investments Amid AI Demand Fluctuations

In a surprising move, Microsoft has canceled several data center leases in the United States, amounting to a few hundred megawatts – equivalent to the capacity of two large data centers. This decision comes as the company reevaluates its infrastructure investments in response to evolving AI demands.

Analysts from TD Cowen suggest that this adjustment may indicate an oversupply situation or a strategic shift, possibly influenced by OpenAI's recent partnership with Oracle for their ambitious $500 billion AI project, Stargate. Despite these changes, Microsoft maintains its commitment to investing over $80bn in AI data centers this fiscal year.

Apple Commences Construction of AI Server Factory in Texas

Elsewhere, in a strategic move to bolster its AI capabilities, Apple has begun constructing a 250,000-square-foot factory in Houston, Texas, dedicated to producing AI servers for its data centers.

Partnering with Foxconn, Apple plans to commence production later this year, with the facility expected to be fully operational by 2026.

This initiative is part of Apple's broader $500bn commitment to US investments over four years, which includes a $10bn allocation for its Advanced Manufacturing Fund.

Additionally, Apple is expanding its data centers and aims to create approximately 20,000 R&D jobs across the US in the coming years.

Nvidia Addresses Investor Concerns Amidst Emerging Competition

Nvidia is poised to engage with investors following market disruptions caused by Chinese startup DeepSeek. DeepSeek's release of an open-source reasoning model, R1, demonstrated impressive performance using fewer and less powerful chips, leading to a significant $600bn drop in Nvidia's market capitalization in a single day.

CEO Jensen Huang is expected to reassure investors by highlighting Nvidia's robust data center business, bolstered by substantial investments from industry giants like Meta, Amazon, and the Stargate project.

Despite initial rollout challenges with its latest chip series, Blackwell, Nvidia remains confident in meeting the growing demand for AI inference processes and plans to address potential US-China trade tensions and export regulations in its upcoming earnings report.

France Unveils €109bn AI Investment Plan

The French government has unveiled an ambitious €109bn investment plan aimed at positioning the country as a leader in AI. The strategy includes significant funding for the development of AI infrastructure, research, and talent cultivation.

Elon Musk's xAI Establishes Second Mega Data Center in Atlanta

Elon Musk's AI venture, xAI, has discreetly developed a second mega data center in Atlanta, following the establishment of their initial facility in Memphis. The Atlanta data center, financed through a $700m agreement with Develop Fulton, is equipped with approximately 12,448 Nvidia GPUs, predominantly the high-powered Hopper-generation H100 models.

This infrastructure supports the development and training of advanced AI products, including xAI's conversational AI, Grok. The project is anticipated to have a significant economic impact on the region, estimated at around $241m, and underscores Musk's strategy of consolidating resources to position xAI as a formidable competitor against established tech giants.

California Legislators Propose Regulations on Data Center Energy Consumption

In response to the burgeoning energy demands of data centers, California lawmakers have introduced legislation aimed at preventing the escalation of electricity costs for residential and small business consumers.

The proposed bills mandate data centers to disclose energy usage, adopt efficiency standards, and incentivize the use of clean energy through tax incentives. These measures address concerns that the rapid expansion of AI, particularly large-scale models like ChatGPT, is significantly increasing energy consumption.

Similar regulatory efforts are underway in states such as Virginia, Texas, Ohio, and Oregon, aiming to manage data center energy usage and mitigate cost impacts on consumers.

Australian Data Center Developer CDC Achieves $17Bn Valuation

CDC, a prominent data center developer, has reached a valuation of AUD $17bn following a significant transaction in which the Commonwealth Superannuation Corporation (CSC) sold half of its stake for over $2bn to Future Fund and Infratil.

Founder Greg Boorer now holds a $622m stake in the company he established in 2007 and has no immediate plans to divest. CDC currently operates 14 data centers with plans to expand to 30 by 2030.

London Faces Data Center Expansion Challenges Amidst Grid Constraints

London's data center expansion is encountering challenges due to substantial grid constraints, with approximately 400 gigawatts of grid requests pending. This bottleneck has led to delays in data center construction and has prompted discussions about sustainable growth and infrastructure planning. The situation highlights the need for strategic energy management to support the city's burgeoning digital infrastructure demands.

And that’s a wrap on February’s data center rundown! It’s been a wild month – Microsoft making big moves, Apple doubling down on AI, Nvidia facing fresh competition, and let’s not forget London’s grid struggles. One thing’s clear: AI is pushing the industry faster than ever, and with that comes big questions about infrastructure, energy, and who’s really leading the charge.

March is bound to bring even more shake-ups, so stay tuned! Until then, check out our resource hub for more industry insights.