Meta scraps $342M Danish data center expansion for AI pivot

The news: Meta terminated the contractor for its various Danish data center expansion projects, claiming it is pivoting to AI facilities instead, per Data Center Dynamics.

Work stoppage in Denmark: Construction on Meta’s expansion was already underway, with foundations, sewers, cables, a canteen and parking space for 1,000 cars already installed when the contract was terminated.

“We have decided not to move forward with the planned expansion beyond three buildings,” said Meta spokesman Peter Münster in a statement. “Supporting AI workloads at scale requires a different type of data center than those built to support our regular online services.”

Rethinking data center design: “Higher densities require a shift in the way in which we design, build, and cool data centers. In recent years, we have seen liquid cooling gaining traction in the industry, to combat the increasing energy demands,” Henrik Hansen, CEO of the Danish Data Center Industry, said after Meta's decision.

AI pivot or signs of a struggling business? The sudden stoppage in Meta’s expansion plans feels drastic and comes at a time when the company is looking to cut costs. 

• Last month, Meta CEO Mark Zuckerberg announced the company is cutting more than 11,000 jobs, or 13% of the company’s staff.
• Meta’s stock plunged 71% this year as the company spent $15 billion on building Zuckerberg’s vision for a VR metaverse.
• The company’s attention is now divided between putting out economic fires, staving off competition from TikTok, and building its VR ecosystem.
• The latest shift in strategy could be a sign of further spending cuts as the company reprioritizes its focus.

Productizing AI, a more attainable target: Meta could be changing its mind about VR and the metaverse. The shift in data center production toward something that’s better-oriented to AI could hint at its direction.

• The company revealed various AI projects that could ostensibly power the metaverse, but given the sudden popularity of projects like ChatGPT, AI could be a marketable product for Meta.
• The company recently unveiled Cicero, an AI agent that “negotiates, persuades, and cooperates with people.” Applications include service chatbots and smart assistants.

Our take: AI could help Meta dig itself out of its metaverse doldrums while showcasing technologies it excels at and that are ready to ship as products. Given the surge in interest over commercializing AI, Meta could monetize its AI products to reach its VR ambitions.