Amazon’s $16 billion data center bet: Escalating costs signal cloud, streaming, and AI price hikes

The news: The cost of Amazon’s Mississippi data centers are expected to jump 60% over initial estimates, emphasizing the increasing costs of data center construction for cloud computing and AI.

• The two new data centers north of Jackson, announced a year ago, were originally estimated to cost $10 billion but costs have now increased to $16 billion.
• Amazon called it “the single largest capital investment in Mississippi’s history,” per Bloomberg. 

Infrastructure remains Amazon’s investment priority, and most of its estimated $75 billion in capital expenditures will go to Amazon Web Services (AWS) and AI.

The details: Amazon plans to spend $7.2 billion on servers, fiber-optic cable, and tech infrastructure for the Mississippi project, per state planning documents.

The company estimated the investment would add some $3.3 billion to the state’s gross domestic product and create 1,000 jobs by 2027. However, documents show that two-thirds of those jobs will be contractor roles without company benefits.

Cost overload: Data center expansion costs are escalating due to the need for expensive hardware like Nvidia’s GPUs and other IT infrastructure. That could also affect estimates for the $500 billion Project Stargate.

Data center spending is expected to rise 15.5% YoY, per Gartner, but we’re now seeing that estimate is conservative.

Key takeaway: Costlier data centers could raise prices for web hosting, video and audio streaming, ecommerce, AI, and apps and services. 

These costs will likely be passed down to businesses and consumers relying on these services and could result in them seeking cheaper alternatives or canceling subscriptions and services. Budgeting for those changes in advance will likely be the smart play.

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