The "Gold Rush Era" of U.S. Data Centers

The AI wave is driving the U.S. data center industry into a capital frenzy, with giants pledging to invest hundreds of billions of dollars and a $40 billion acquisition setting a new record. The industry is witnessing frequent innovations in financing models: leaseback transactions and Nvidia's deep involvement in financing are forming a circular capital flow. AI companies are crossing over to build gigawatt-level data centers, challenging traditional rules.

Written by: Dong Jing

Source: Wallstreetcn

The AI wave is pushing the U.S. data center industry into a capital frenzy. Massive amounts of capital and new players are pouring in, and innovative financing structures are emerging one after another. However, beneath the surface of prosperity, the huge gap between profit expectations and reality, the fragility of circular dependencies, and the lack of experience among new entrants are accumulating systemic risks in this gold rush.

On October 20, according to technology media The Information, the atmosphere at last week's data center industry conference in Las Vegas was completely different from a year ago. OpenAI, xAI, and Meta have pledged to invest hundreds of billions of dollars over the next decade, and the focus of discussion has shifted from "difficulty finding land and electricity" to "who can build the most gigawatt-capacity" data centers. An investment group led by BlackRock and MGX set a record by acquiring the 12-year-old data center operator Aligned Data Centers for $40 billion.

The report states that behind the optimism lie real challenges. Take Oracle as an example: its AI cloud business's actual financial data over the past five quarters shows that the current profit margin from leasing Nvidia chips is 15-20 percentage points lower than the target value. Industry insiders privately express caution, warning against "overly circular capital flows" or transaction structures that "overly rely on a single company."

Innovative Financing Structures Become the New Normal

To support astronomical investments, the industry is inventing various creative financing methods.

Leaseback transactions have become the new favorite. xAI purchases Nvidia chips from its main investor Valor Equity Partners and then leases them back for use. OpenAI is also discussing similar structures with Nvidia—developing and managing its own data centers but using leasebacks to reduce costs and avoid paying premiums to Oracle and Microsoft.

 According to reports, the essence of these transactions is a risk-sharing mechanism that blurs the boundaries between customers, suppliers, and financiers, allowing capital to continuously flow into data center construction. The acquisition of Aligned Data Centers acted like a shot of adrenaline, motivating more operators to look for buyers.

At the same time, Nvidia is not only a chip supplier but is also deeply involved in the financing process—providing financing for chip customers and data center projects, with funds ultimately flowing back in the form of chip purchases.

Industry insiders are concerned about whether this circular capital flow is distorting real demand, and whether Nvidia's dual role as both referee and player could create a market bubble. However, OpenAI recently pledged to use AMD chips and chips co-designed with Broadcom, signaling an intention to break Nvidia's monopoly.

AI Companies Cross Over to Challenge Industry Rules

In this data center "gold rush," the most striking phenomenon is the role reversal.

According to reports, Poolside, originally an AI programming startup, now claims to be building a 2-gigawatt data center, planning to lease part of it to AI cloud service provider CoreWeave, and claims to have cracked the industry's most pressing bottleneck. Startups like Fermi are directly jumping into multi-gigawatt projects, betting they can beat cloud computing giants like Google and Microsoft in speed and performance.

These new entrants, lacking traditional data center development experience, are challenging the industry's established rules. Traditional data center developers are increasingly skeptical of the capabilities of new players. Microsoft executives once told OpenAI that they did not believe Oracle could deliver on its promised gigawatt-level capacity.

Many industry insiders have been recruited by new entrants to "solve urgent operational challenges." Many predict that a reshuffling moment is imminent, and overly aggressive projects will collapse due to delays, power shortages, or unrealistic timelines.

However, Profit Reality Tests Business Models

However, behind the optimism lie real challenges. Oracle gave optimistic revenue and profit margin forecasts at its annual cloud conference, but actual financial data from the past five quarters revealed a harsh truth—the current profit margin from leasing Nvidia chips is 15-20 percentage points lower than the target value.

AI cloud service providers are in a race against time: they must purchase expensive Nvidia chips in advance, but customers only start paying after the project is completed and meets performance standards. Uncontrollable factors such as power supply and equipment delays can disrupt plans at any time.

When the roles of suppliers, customers, and financiers overlap, systemic risks accumulate.

Industry leaders privately warn of the fragility of such circular dependencies. When Microsoft chose to let Oracle handle part of OpenAI's server needs, the industry's smartest players were already speaking with their actions: either they have a pessimistic view of long-term demand, or they are unwilling to take on excessive risk.

Analysts point out that in this gold rush, Nvidia firmly holds the "shovel seller" position, traditional cloud giants have technological accumulation and risk tolerance, while new entrants face the greatest uncertainty. Only those with true technical capabilities, ample capital reserves, and risk management experience will remain standing when the tide recedes.