Data centers on what was recently farmland in Aldie, VA. (Jahi Chikwendiu/The Washington Post via Getty Images)
Data center construction levels are at an all-time high. And more than ever, companies that need them have already called dibs.
In the first quarter of 2024, what amounts to about half of the existing supply of data center megawattage in the US is under construction, according to real estate services firm CBRE. And 84% of that is already leased. Typically that rate had been about 50% the last few years — already notably higher than other real estate classes.
“I’m astonished and impressed by the demand for facilities yet to be fully constructed,” CBRE Data Center Research Director Gordon Dolven told Sherwood.
That advanced interest means that despite the huge amount of construction, there’s still going to be a shortage of data centers to meet demand. In other words, data center vacancy rates are staying low and rents high.
Nationwide the vacancy rates are near record lows of 3.7% and average asking rent for data centers was up 19% year over year, according to CBRE. It was up 42% in Northern Virginia, where many data centers are located. These sorts of price jumps are “unprecedented” compared with other types of real estate. For comparison, rents for industrial and logistics real estate, another hot asset class used in e-commerce, is expected to go up 8% this year.
As such, data center REITs like Digital Realty, Equinix, and Iron Mountain have been performing really well.
The backlog of demand isn’t going away anytime soon. It takes a really long time to build data centers because it doesn’t just require building data centers. Data centers need updated power grids, fiber lines, and water to come online, and often those connections have to be built as well. And those are subject to supply chains, permitting, easements, and other roadblocks.
As Dolven put it, “Instead of a dirt road, they need 6-lane highways.”
Getting all that squared away adds an additional 1-3 years at least on top of 1-3 years it already takes to build the typical data center, Dolven said.
And our need for data centers and the infrastructure they rely on is only going up. Not only are the applications we use daily collecting, generating and parsing tons tons of data, but the rise of generative AI is going to turbo charge these needs even more.
As my colleague Matt Phillips pointed out, data centers were already sucking up vast amounts of power before the AI boom. Indeed, data center electricity demands are running up against power companies’ ability to generate it.
Today Anthropic launched Claude Design, a dedicated app powered by its latest model, Claude Opus 4.7, that lets users use text prompts to build website designs, user interface prototypes, presentations, and marketing materials.
Shares of Figma and Adobe sank on the news.
While Claude has previously had the ability to create designs and user interfaces, breaking it out into a dedicated app signals a major new piece of its enterprise strategy alongside its popular Claude Code product.
Today Anthropic launched Claude Design, a dedicated app powered by its latest model, Claude Opus 4.7, that lets users use text prompts to build website designs, user interface prototypes, presentations, and marketing materials.
Shares of Figma and Adobe sank on the news.
While Claude has previously had the ability to create designs and user interfaces, breaking it out into a dedicated app signals a major new piece of its enterprise strategy alongside its popular Claude Code product.
Anthropic has surged past OpenAI in capturing business spending on generative-AI software
Last quarter, Anthropic attracted the lion’s share of trackable business spending on generative-AI software, according to new data from Ramp, a fintech company that provides corporate cards and expense management software for small firms and Fortune 500 companies alike.
The data showed that in the first quarter, Anthropic saw 37% of spending, its biggest share yet, versus 33% for OpenAI. Notably, the dataset doesn’t capture spending by Google or Microsoft.
OpenAI, which makes ChatGPT, still leads in overall adoption at 81% of AI buyers, but Anthropic is catching up, at nearly 63% in March. Overall, more than half of Ramp’s customers currently pay for AI, up from just 18% two years ago.
Anthropic’s enterprise tools, including Claude Code and Cowork, have been making waves among the business class, sending its revenue soaring.
Anthropic’s revenue share is even higher among companies spending on AI for the first time.
“Anthropic has definitely been on a tear,” Ara Kharazian, Ramp’s economist, told Sherwood News. “Its increase in adoption rates has been driven by its ability to sell to less technical users and smaller contracts than it typically has.”
It’s notable that midway through the first quarter, Anthropic had a falling-out with one of its biggest customers, the US government, which near the end of February decided to shun Anthropic’s products and lean into working with OpenAI.
Report: Google ditches its objection to defense work, pitches Gemini to Pentagon
In 2018, Google employees protested against the company’s tech being used for the US military’s Project Maven — a drone targeting program — reminding the company of its “don’t be evil” motto.
After the controversy, the company declined to renew the contract with the Pentagon, drawing a bright line between Big Tech and the national security establishment.
What a difference a few years makes.
Google is now actively working to get its Gemini AI model to be used in classified national security settings, according to a new report from The Information. Seeking a similar deal to the one OpenAI hashed out with the Pentagon, Google reportedly wants a contract that allows use of Gemini in classified work, but with a prohibition on mass domestic surveillance and autonomous lethal weapons.
But Google is playing catch-up in a major way. Amazon and Microsoft both have been widely used for classified defense work, and contractors are already experienced in working with their cloud systems, while Google’s services have never been used in classified work.
What a difference a few years makes.
Google is now actively working to get its Gemini AI model to be used in classified national security settings, according to a new report from The Information. Seeking a similar deal to the one OpenAI hashed out with the Pentagon, Google reportedly wants a contract that allows use of Gemini in classified work, but with a prohibition on mass domestic surveillance and autonomous lethal weapons.
But Google is playing catch-up in a major way. Amazon and Microsoft both have been widely used for classified defense work, and contractors are already experienced in working with their cloud systems, while Google’s services have never been used in classified work.
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