Power & Sites · United States

A data-center slowdown could strengthen cloud suppliers

Credited to Rackline · Elizabeth Harding · microsoft.com · 2h ago

Microsoft and Google are choosing how scarce compute serves their own products, cloud customers and outside model developers. That gives these integrated platforms influence over the next AI expansion beyond the price of renting machines. A lab seeking more capacity negotiates with a supplier that also builds models, sells enterprise software and brings competing products to customers. The supplier has more ways to make money from the next cluster than a host selling infrastructure alone.

Restrictions on permitting or grid connections would amplify that existing allocation power if they delay usable new capacity while demand holds. The evidence is not that the election has already caused shortages. It is that working clusters are scarce now and their owners have choices. The greatest pressure falls on incremental or unreserved expansion: the buyer needs an additional commitment, rather than continued performance on an existing one. Slower demand would reverse the advantage by making capacity easier to obtain.

Microsoft has described the choice explicitly. On its Oct. 28 earnings call, Chief Executive Satya Nadella said its shared fleet lets it direct capacity toward higher-value opportunities across compute, data, Foundry and Copilot. Discussing large customers, he said Microsoft would sell capacity when the pricing was right and otherwise concentrate on building its broader enterprise business. A large buyer's willingness to spend therefore competes with Microsoft's other commercial priorities. The decision is not presented as an auction won automatically by the highest bidder.

Political influence operates through specific authorities. Texas legislators set large-load connection requirements, and the Public Utility Commission implements them; its commissioners are governor-appointed and Senate-confirmed. A security rule effective Oct. 8 covers specified new or expanded connections. Local planning powers matter too: Manatee County commissioners approved a 12-month pause on new data-center-related applications in the county's unincorporated area. Both measures predate the election. Future officials can change policy through those institutions, but election results impose no national construction freeze.

The economic effect depends on whether those decisions delay working clusters. Fewer timely permits or grid connections mean less usable new supply; if buyers still need it, existing owners choose which additional workloads to serve, affecting rivals' expansion costs and schedules. Electricity, cooling, networking and chips must arrive together. Anthropic identifies transformers and turbines among its infrastructure risks. These constraints also reach hyperscalers' own future projects. Their existing powered fleets and their construction pipelines are different investments, and a connection queue measures neither available GPUs nor completed clusters.

Google also treats allocation as a choice across businesses, rather than just a sale of machine time. On Alphabet's Oct. 28 call, Chief Executive Sundar Pichai described long-range investment-return planning and said its models underpin Search, YouTube, Cloud and other businesses. Microsoft likewise develops its own MAI models for its software. Both companies can weigh a lab's infrastructure purchase against uses inside their own platforms. That gives them alternatives when negotiating expansion, without requiring them to reserve all capacity for themselves.

Software distribution supplies a separate source of influence. Microsoft says 90% of Copilot queries use automatic routing across models, optimizing for quality, speed and cost. Its Foundry platform also connects outside models to enterprise customers. Those product choices influence which models get used, independently of whether computing capacity is scarce. Together, the two capabilities let a cloud discuss both the resources a lab needs and the customers it hopes to reach in one commercial relationship.

Capital-backed partnerships make that relationship tangible. In Nov. 2025, Microsoft announced an investment commitment of up to $5 billion in Anthropic alongside Anthropic's $30 billion Azure purchase commitment and access for Claude through Foundry and Copilot products. Those are the historical announcement's terms, not today's total commitments. The package shows how a cloud can help finance a lab, supply its compute and distribute its models. For Anthropic, that supports more model development and customer deployments while giving Microsoft a negotiating role in the scale and timing of its Azure expansion.

Reservations turn access into a financing decision even without an investment deal. Google's published rules say provisioned reservations hold resources and require payment whether they are used or not. An allocation quota, by contrast, does not guarantee that resources are available. A startup planning a large deployment must therefore consider securing capacity before its usage arrives, finding another supplier or changing the workload. That can consume financial flexibility earlier in its growth. For a startup with uncertain usage, reserving early shifts more of the risk of underused machines from the provider to the buyer.

Labs that already secured long reservations can gain against entrants too. OpenAI's reserved-capacity orders with CoreWeave establish a direct route outside the biggest integrated clouds, while Anthropic's filing documents multiyear cloud spending commitments. Once reserved resources are delivered and fit the workload, a lab can add training runs or serve more customers while an entrant without that access must first negotiate an allocation.

Specialists can capture value from the hyperscalers themselves. Nebius agreed to provide Microsoft dedicated capacity from Vineland, New Jersey. In its Sept. 2025 announcement, Nebius expected to finance the buildout through customer cash flow and debt secured against the agreement, with terms improved by Microsoft's credit quality. That financing route uses an anchor customer's commitment to support an independent builder's expansion. Capacity dedicated to Microsoft is not automatically available to another lab, but the owner of deliverable power has bargaining power upstream.

Off-cloud hardware makes the counter-case stronger. Google says it now supplies complete TPU systems for customer data centers and is expanding availability through other providers. Alphabet expects a meaningful system-sales revenue increase in 2027. If independent powered sites can combine those systems with competitive service, labs gain an alternative to buying the entire cloud package. Google also says third-party bridging capacity will pressure Cloud margins. That is a concrete reason integrated platforms cannot assume they capture all the value of scarce supply.

Efficiency can shorten the advantage before another building opens. Microsoft reported more than 50% higher quarterly throughput for Copilot workloads and said broader engineering improvements enabled additional customer allocations. The throughput figure describes those workloads, not a fleetwide increase in availability. Microsoft also expects delayed third-party capacity during its fiscal second half. Actual deliveries, combined with gains that exceed usage growth, would give buyers additional options and weaken the leverage attributed to shortages. The advantage lasts only while demand keeps absorbing the compute released by engineering gains and new deliveries.

Current disclosures still favor suppliers with usable capacity. Microsoft says demand exceeds available supply; Alphabet describes a constrained environment despite its own chips and outside purchases. Amazon offers a narrower pricing signal: in its own account of third-quarter earnings remarks, Andy Jassy said short-term prior-generation Trainium capacity sold at a premium to the first half of 2026. It supplied no premium percentage or matched price series.

When deliverable expansion is scarce, Microsoft and Google can negotiate capacity alongside financing and distribution, giving them influence over how quickly an AI business grows. A well-funded entrant still needs a supplier willing and able to deliver. Independent capacity that is usable and delivered on time gives the entrant a way to expand without relying on the integrated platform's next offer.

Power & SitesUnited States

CoreWeave Asks Texas Governor-Elect for Data Center Cooperation

Credited to Bloomberg$ · bloomberg.com10h ago

Useful

CoreWeave Inc. sent a letter to Texas Governor-elect Gina Hinojosa seeking to work with her incoming administration on present and future data center projects in the state.

View the article · $Bloomberg

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Power & Sites · United States

After the midterms, things are looking rocky for Elon Musk and data centers

Credited to TechCrunch · techcrunch.com · 9h ago

Democrats’ historic victory in this week’s midterm elections could also have a dramatic effect on the tech industry.

In dozens of local ballot measures, voters rejected data centers. And even when they weren’t voting on the issue directly, they were electing politicians — like Texas’ new governor-elect Gina Hinojosa — who campaigned on the promise of restricting data centers.

On the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I discussed what the midterms mean for the tech industry. Sean kicked it off by noting that Elon Musk “seems to have basically nothing out of donating half a billion dollars” to Republicans, while his companies are now headquartered “in a state that has, remarkably, turned about as blue as it could possibly turn.”

And Kirsten said that while data centers probably weren’t the main cause of the “blue wave,” they’ve become an “an increasingly grassroots issue, in part because of how hyperscalers and companies have gone about” getting their projects approved. And now, “we’re already seeing companies like OpenAI all of a sudden go, ‘Actually, we can change our policies.’”

Keep reading for a preview of our conversation, edited for length and clarity.

Sean O’Kane: First off, let’s talk about the fact that one of the biggest data center builders was also the largest donor to the Republican Party. Elon Musk seems to have gotten basically nothing out of donating half a billion dollars — maybe even more, by the time we see the final count — and in fact is now sitting there with all of his businesses in a state that has, remarkably, turned about as blue as it could possibly turn for the first time in a very long time, if ever.

That, I think, is the biggest thing hanging above a lot of this discussion. But, there were also a bunch of ballot measures up around the country that would have paved the way for data centers to get built faster. Almost all of them got shot down, or voted against. [Actually, many of the ballot measures would have imposed restrictions or moratoriums on data centers, and almost all of those measures passed.]

With [Democrats] in power, there is a consensus view, at least in the tech world, that this is going to mean we have a lot of roadblocks ahead for data centers, especially in places like Texas, where [you have] folks like the governor-elect [Gina] Hinojosa, who has spoken pretty openly about this being a campaign promise and something that she wants to focus on once she takes power, now that she’s beaten Greg Abbott.

It’s the thing that I think the tech world is maybe a little too focused on. I’m curious what you guys think about that.

Anthony Ha: I don’t necessarily think that they’re too focused on it, but I understand why it would feel a little bit disproportionate — the data center ballot measures, certainly there were a number of them, but it wasn’t something that was on the ballot everywhere.

And in different races, the dynamic might have been a bit different, but there was this undercurrent and sense that it seems to be an issue that reaches across the country, that is bipartisan in a lot of ways, but that the Democrats seem to have been more effective at harnessing that energy. And of course, there’s all kinds of reasons why the Democrats did so well on Tuesday, but it does seem like anti-AI and especially anti-data center sentiment was a big part of it. That seems like a pretty potent political force.

The next two years, [and] potentially beyond that, are going to be more difficult for tech companies in general, and hyperscalers, data center companies in particular. I also imagine that they have to be a little bit worried about: Is this going to continue to be an issue, not just with the people who got elected this year, but potentially in 2028 and beyond?

Kirsten Korosec: Absolutely. I don’t think that the data center issue is what brought everyone to the polls and led to the quote-unquote “blue wave.” However, I will say that data centers have been an increasingly grassroots issue, in part because of how hyperscalers and companies have gone about getting these data centers [approved] — very secretive, oftentimes requiring NDAs of a elected officials or appointed officials, not sharing information about the scale of a project in very environmentally sensitive areas, including in the Southwest, where there’s very much a water scarcity issue.

So I think that a lot of folks — Republicans, independents, and Democrats — all saw this as wrong. They were motivated by it, but I don’t think it was a singular issue.

Now, here’s the interesting thing. There was a lot of waving of hands about how [AI companies] can’t possibly operate under any other circumstances. And we’re already seeing companies like OpenAI all of a sudden go, “Actually, we can change our policies.” They just released what they call a compute campus policy blueprint. And guess what? They’re not going to require NDAs anymore. They’re going to share their plans and supposedly operate in less secrecy.

I think what this shows is that when you put up either a regulatory certainty in the marketplace, or at least signals of going in that direction, then corporations will respond. If you don’t do that, they will not necessarily do the thing that we hope that they will do.

Anthony: One thing I want to emphasize is that they’re calling it this [their] “compute campus policy.” And part of what that’s doing, beyond laying out these policy changes, is also an attempt to rebrand data centers, because they have become such a toxic phrase. So they’re not data centers anymore, they are compute campuses, and I’m curious, whether either of you think that’ll take.

Sean: I mean, this is ridiculous. Come on. It’s not going to change anything. It’s going to cause them more effort. For a company that likes to say that it’s no longer focused on side quests, OpenAI still loves to go in different directions a lot. And this is just the latest kind of thing where it’s just like: Why are you spending time on this at all? It doesn’t really seem like it’s going to move the needle.

Kirsten: I have a great idea for OpenAI. Because in the spirit of making threatening things seem cute, they should 100% create a compute campuses avatar, [a] cutesy thing, and then just present that instead of a power-, energy-sucking, water-sucking data center.

Anthony: And if these are just lovely compute campuses, they should just build their own offices there or work next door, see how that works out for them.

Something else that I’m wondering about is, to what extent the election is maybe the second part of a one-two punch. [We’ve just seen] a big shift in how Wall Street is reacting to a lot of these hyperscalers and AI companies and this sense that [investors] are not excited about the idea that they should be spending all this money building new data centers, spending all this money on compute. And so there’s a financial incentive not to build all these data centers.

I’m very curious how that’s going to play out. [From a regulatory standpoint,] it’s probably going to be harder to build data centers. Wall Street is probably not going to reward you for building data centers. But at the same time, to get to the scale that they want to get to, they are probably going to need to build data centers somewhere.