ON-PREM

Another fun example of AI hype and reality colliding

Don't count your bit barns before they've at least started to hatch. Developers continue to announce new datacenter construction projects, but construction work for many due to come online this year or next appear not to have commenced, while planned capacity may have been overestimated.

According to financial analyst Jefferies, known promises to build new stateside datacenters suggest 160 GW worth of infrastructure will be operational in the country by 2032

In a research note shared with The Register, the firm reports pervasive delays and claims that only 12 GW out of 24 GW of datacenter capacity scheduled for 2026 is currently under construction. The situation is even worse for the 2027/2028 timeframe, as substantial construction of as much as 80 percent of the planned capacity does not appear to have started yet.

The reasons for the delays are familiar: zoning and/or permitting challenges, interconnection setbacks, problems accessing energy supply, labor shortages, and the signing of commercial contracts with end users.

Power availability is a well-known issue, as are grid connection setbacks. The latter have grown so bad – reports of seven-year delays - that the US Energy Secretary directed the Federal Energy Regulatory Commission (FERC) to implement new rules to speed the process for customers such as datacenters.

Jefferies highlights another factor, that of duplicative counting inflating the planned total capacity due to hyperscalers making multiple requests to various energy utilities. For this reason, it does not expect the majority of the extra load forecast for 2026 and 2027/2028 to materialize.

Some investor expectations do not reflect real-world constraints, primarily labor, the report says, suggesting that 15-20 GW of capacity coming online per year is more realistic than the 40+ GW forecast by some for 2027-28.

Announced capacity should not be considered a reliable way of evaluating data campus load growth, Jefferies says, citing offtake agreements, permitting progress, financing, and a realistic construction timeline as better indicators.

The report points to strategies that operators are taking to circumvent the issues outlined above.

Behind-the-meter and hybrid models are solutions to the power problem, with “hybrid” referring to datacenters tending to take all they can get from the grid first, before later turning to behind-the-meter sources -  typically on-site power generation.

Jefferies says that the build pipeline is shifting increasingly toward regions with more attractive interconnection and permitting options, pointing out that Texas had 14 GW of new capacity announced in the second quarter of this year alone. ®