Deep Insight: Are we in a Data Centre Bubble?
This week Bloomberg noted that Big Tech companies (Microsoft, Alphabet, Amazon and Meta) will spend more than $344 billion on capex primarily for AI data centres.
It comes as Morgan Stanley estimates that expenditure on AI infrastructure will reach $3 trillion through 2028. And right now, according to TopBuild Corp there are in the US:
324 data centre projects under construction.
110 in the engineering stage.
2,000 projects in the planning stage.
It’s not just the quantity of data centres, according to Sightline Climate, the average project size is increasing rapidly. A few years ago, 150MW was considered a big project, today 1GW is common with the median announced investment for projects $800m.
The problem is we are starting to see the strain with this level of investment:
Land Use
In Northern Virginia (the data centre capital), residents have been asking for the county to rezone their homes to industrial use so they can sell and move away. One impact report found that one third of data centres are located near residential areas due to inadequate planning and zoning.Energy and Cooling
Racks of computers running Nvidia’s chips consume at least 10 times as much power as a regular web server. They give off so much heat that air conditioning is not enough to cool them.Water
Hyperscale and colocation sites in the US consumed 55bn litres in 2023, making water scarcity a concern.
But despite this there are little signs of slowdown.
The current administration has listed data centre construction as a national priority with executive orders to expedite development.
And at a municipality level data centre tax revenue is incredibly lucrative. According to Loudon Country, for every $1 invested into data centres, it receives $26 in tax revenue.
So are we really in a bubble?
The scale and pace of investment is reminiscent of prior booms. However this investment appears underpinned by a shift in demand where AI workloads require an order of magnitude more compute.
But this bubble may not be financial.
What may ‘pop’ is the social license to operate as local resistance, environmental stress and homeowner opposition begins to reshape how and where AI data centres are built.
In this issue there are:
13 Startup Fundings
13 Policy and Regulatory Changes
9 New National Infrastructure Projects & Priorities
0 New investment funds
0 Acquisitions
6 News articles
9 new jobs posted - view here
Reading time: 12 mins
Startup Funding
Soil Remediation
Liora, a Canadian startup, raised CAD $5.1m in Seed funding. They help companies clean contaminated sites such as industrial facilities and oil refineries, providing a sensor which tracks biological activity and pollution in the soil, a platform to analyze the data and a nutrient mix which breaks down hydrocarbons helping reduce the cleanup timeline from 20 years to 5. More here.
Notes:
As of March 2023, there are 24,109 contaminated sites across Canada.
Cleaning up ~4,500 unmediated sites could cost more than $10 billion.
Space Construction
Orbital Matter, a Polish startup, raised €1m Seed funding. They have developed patented 3D printing technology to print complex objects in orbit with the vision of building essential space infrastructure such as habitats on the Moon or walls for space stations, taking advantage of microgravity to use less material than if built on Earth. More here.
Environmental Reporting
Tanso, a Munich startup, raised €12m in Series A funding. They have developed an environmental data management platform which enables structured data collection and accurate calculations for sustainability metrics helping mid sized companies across industries (including construction) comply with EU regulatory requirements that turns communication of sustainability KPIs in areas like Environment, Social, and Governance into part of financial reporting. More here.
Site Management
Crewscope, a Toronto startup, raised $1m in Pre-Seed funding. They are building a jobsite productivity platform which helps site teams set weekly goals, share progress and receive performance summaries, and receive points when goals are completed early which can be used for leaderboards, qualify for promotions or be redeemed for gift cards. More here.
Business Management
Plancraft, a German startup, raised €38m in Series B funding. They are building AI and voice driven solutions to help contractors automate processes such as custom quotes, operations, planning and time tracking. More here.
FieldPulse, a Texas startup, raised $50m in Series C funding. They are building a field service management software for businesses like HVAC, Electrical and Plumbing contractors offering services such as invoicing, CRM, estimating and scheduling to help them grow. More here.
Topline Pro, a New York startup, raised $27m in Series B funding. They are building AI software to manage Marketing, Sales and Operations for home services companies like landscaping, roofing, painting, and plumbing offering ‘done for you’ services such as social media, managing customer requirements and scheduling through AI. More here.
Restoration
Albi, a Chicago startup, raised Series B investment (undisclosed). They have developed a platform for restoration contractors offering business management services such as invoicing and documentation, and Albi Pay, a financial tool allowing flexibility over how and when they receive payments. More here.
Equipment Rental
MyCrane Trading, a Dubai startup, raised $50m in funding. They provide crane sales, leasing and maintenance services for the Gulf Middle East region and have a partnership with MyCrane, a global online crane rental platform. More here.
Green Materials
Green360 Technologies, an Australian company, secured AUD$4m in share placements (market cap: ~$30m). They are developing low carbon cement technology. More here.
Workstation Management
Computle, a British startup, raised £500k in Pre-Seed funding. They are developing a workstation subscription platform that lets architects, engineers, and creative teams rent computers in the cloud which connect directly to their project files so they can quickly set up, work together from anywhere, and avoid the hassle and cost of buying and managing expensive hardware. More here.
Other
Jonathan Katz-Moses, raised $2m in funding. He is a leading woodworking content creator who sells his own tools and accessories to his audience. More here.
Notes:
Katz-Moses channel has ~600k followers and almost 75m views.
The investment in him is a reflection of a shift in the creator economy where creators are shifting from advertising revenue to building businesses using their distribution to reduce customer acquisition costs.
For construction startups, I’ve been noticing two shifts:
An increasing number of startups are partnering with large youtube creators as part of their GTM strategy (I see this most in the generative design / architecture space).
Creators will increasingly become ‘in house.’
The reason why is that startups and media / creators have what the other needs.
Media has an engaged audience and distribution but struggles with monetisation.
Startups have scalable business models but face rising customer acquisition costs.
We’ve already started to see it at Kahua who have two ‘Chief Evangelists,’ Nicholas Johnson and AJ Waters.
In the future, I wouldn't be surprised if startups offer equity to creators in their niche to build long term partnerships.
It’s a trend which has worked effectively in the B2C sector and we are starting to see it in construction as startups are actively sponsoring LinkedIn Construction Influencers via pay per post or affiliate deals.
Policy and Regulatory Changes
US
Trump Cracks Down on Bird Deaths, but Only From Wind Turbines
The interior secretary declared bald eagles must be protected to the fullest extent of the law from dangerous wind turbines.
However 4 months ago Trump called for gutting the Bald and Golden Eagle Protection Act calling it a burden on oil and gas producers.
Notes:
The Trump Administration is taking strong steps against the Wind industry.
This has included revoking wind project permits and tightening regulations around credits.
FAA Publishes BVLOS NPRM: A Watershed Moment for the Drone Industry
The US Transportation Secretary unveiled the Notice of Proposed Rulemaking (NPRM) for Beyond Visual Line of Sight (BVLOS) drone operations.
This refers to drone operations where the remote pilot cannot see the drone with their naked eye.
Until now, it was permitted almost exclusively through complex and limited-waiver processes.
Notes:
If enacted it would enable scaled operations such as remote infrastructure inspections.
DOE puts 11 small reactor projects on a faster track
The Department of Energy selected 10 small nuclear reactor developers to compete for DOE safety design approvals.
The department wants to have at least three new pilot plants operating by July 4, 2026.
Trump administration stops illegal freeze of $5B EV charger funds after losing in court
A coalition of states sued over the funding freeze in the National Electric Vehicle Infrastructure (NEVI) program.
A judge ruled in June that those states were likely to succeed and issued an injunction against the administration’s spending freeze.
The Trump administration has now issued new guidance for how the money can be deployed involving simplifying the review process for the charging stations.
This means states will no longer have to consider consumer protections, emergency evacuation plans, environmental siting, and other previously required steps before construction can begin.
Trump says US to levy 100% tariff on imported chips, but some firms exempt
Trump said the United States will impose a tariff of about 100% on imports of semiconductors.
However it will not apply to companies that are manufacturing in the U.S. or have committed to do so.
The move is part of Trump's efforts to bring manufacturing back to the United States.
The comments were, however, not a formal tariff announcement, and much remains unclear about how companies and countries around the world will be impacted.
Meta turning to mass timber to build more sustainable data centers
Meta is piloting the use of mass timber to construct data centers with less embodied carbon emissions.
They said they have successfully used mass timber to construct an administrative building at a South Carolina data center campus.
The pilot will continue with the construction of additional buildings at Wyoming and Alabama.
Notes:
This could result in an increase in demand for mass timber products.
San Francisco fast-tracks all-electric standard for major renovations
San Francisco already requires most new buildings to run solely on electricity.
Now they are moving to ensure that substantial renovations in existing buildings are also all-electric.
They have completed the first of two votes to pass the All-Electric Major Renovations Ordinance.
The city is now fast-tracking its approval before a new statewide pause on updates to building codes.
Under the law San Francisco and other jurisdictions in California have only until Oct. 1 to adopt stronger building codes unless they claim an exception.
China
China Is Choking Supply of Critical Minerals to Western Defense Companies
China is limiting the flow of critical minerals to Western defense manufacturers.
China supplies around 90% of the world’s rare earths and dominates the production of many other critical minerals.
Certain materials needed by the defense industry now go for five or more times what was typical before China’s recent mineral restrictions.
More than 80,000 parts that are used in Defense Department weapons systems are made with critical minerals now subject to Chinese export controls.
Notes:
Trade tensions on critical mineral supplies is resulting in increased investment in developing a domestic supply chain.
For example the Department of Defense has awarded grants to expand production of niche materials.
The Pentagon recently agreed to pay $400 million for a stake in MP Materials, the operator of the largest rare-earths mine in the Americas, which is rapidly scaling up its magnet manufacturing capacity.
Trade tensions with China are likely to continue and construction spending will flow into developing resilient supply chains.
India
Govt aims to accelerate pace of highway construction to 100 km/day
Union Road Transport and Highways Minister Nitin Gadkari said the government's aim is to accelerate the pace of highway construction to 100 km a day.
Road construction is currently at 38 km/day.
The ministry constructed 10,660 km of national highways in 2024-25, 12,349 km in 2023-24 and 10,331 km in 2022-23.
Yogi Government Approves Industrial Estate Policy to Fast-Track Uttar Pradesh’s $1 Trillion Goal
The Yogi government has given a green signal to the ‘Micro, Small and Medium Enterprises (MSME) Industrial Estate Management Policy.’
The primary objective of this policy is to promote industries through easy and transparent land allocation, modern facilities, and better management.
This means the allocation of land, sheds, and plots available in industrial estates will be done on lease/rent through auction or e-auction modes.
The policy reserves 10% of all plots and sheds for SC/ST entrepreneurs.
UK
Government unveils 10 new construction technical colleges
The government has named 10 specialist Construction Technical Excellence Colleges with £100m of funding.
This is to train more than 40,000 future builders, bricklayers, electricians, carpenters and plumbers by 2029 and part of the Government’s plan to build 1.5 million new homes.
South Korea
Govt. launches task force to create next-gen power grid using AI
The government has launched a task force aimed at establishing a next-generation power grid that will use AI to improve efficiency in the power supply.
It was formed after a call to create an intelligent power grid that connects the entire nation with optimal power generation, storage and consumption.
Notes:
Grid Tech is of increasing interest globally.
A reason why is that through the integration of distributed energy sources, we are moving from a centralized to a decentralized grid with 2 way flows.
Additionally the grid is aging. In the US the average transmission line is 45.9 years old with a 70-year expectancy. Replacement would cost $40 billion per year over the next 20 years.
Israel
Reform approved: All building types must use inspection institutes starting January 2026
Starting January 2026, all types of buildings and works in Israel will be required to pass through certified inspection institutes.
This is a condition for issuing building permits, approval to start works, and final certificates.
Exceptional and complex buildings are exempted by the regulations.
The inspection procedures carried out by the institutes include sample and process tests on building planning and execution.
New National Infrastructure Projects & Priorities
US
US Green Project Cancellations Hit $22 Billion in First Half
Companies canceled, closed or scaled back more than $22 billion worth of investments in clean-energy projects.
That represents about 17% of the $133 billion worth of green projects announced since the start of 2022.
Meta Picks Pimco, Blue Owl for $29 Billion Data Center Deal
Meta Platforms Inc. has selected Pacific Investment Management Co. and Blue Owl Capital Inc. to lead a $29 billion financing for its data center expansion in rural Louisiana.
Pimco is expected to lead a $26 billion debt portion of the financing, while Blue Owl is providing $3 billion of equity, according to people with knowledge of the matter.
U.S. Secretary of Interior announces end to Lava Ridge wind project in Idaho
Magic Valley Energy had sought a permit to build more than 200 wind turbines that would generate an expected 1,000 megawatts.
The Department of the Interior Secretary said he would reverse approval of the large wind farm project.
China
Construction permit granted for new Chinese plant
The construction of two 1200 MWe Hualong One reactors has been approved.
Once all six units have been completed, the total installed capacity of the Jinqimen plant will be about 7.2 GWe.
China set to begin building strategic Xinjiang-Tibet Railway this year
A Xinjiang-Tibet Railway Company that is wholly owned by China State Railway Group has been formally registered with 95 billion yuan (US$13.2 billion) in capital.
The route will join the existing Lhasa-Shigatse railway line with a new one from Hotan to Shigatse.
This will form a roughly 2,000km (1,240-mile) strategic artery linking northwestern and southwestern People’s Republic of China (PRC).
The planned railway – the Xinjiang-Tibet Railway – is one of four lines planned to connect Tibet Autonomous Region (TAR) with the rest of the PRC.
India
India Approves New Hydropower Project Near Disputed China Border
India’s cabinet has approved the construction of a 700-megawatt hydropower plant in a region also claimed by China.
The Tato-II project is expected to be completed in six years at a cost of 81.5 billion rupees ($929 million).
Australia
Marinus Link secures FID for construction of Stage 1
Marinus Link is a proposed undersea and underground electricity and data interconnector between North West Tasmania and the Latrobe Valley in Victoria, Australia.
The project’s cables span 345km, including 255km of undersea cables across Bass Strait and 90km of underground cables in Gippsland, Victoria.
Its capacity is equal to the power supply for 1.5 million Australian homes.
It has received a final investment decision (FID) for proceeding with the construction phase of Marinus Link Stage 1.
Syria
Syria to expand main airport and build subway in $14 billion deal with foreign partners
The new Syrian government has announced the country's largest foreign investment deal in years.
The plans include:
$4 billion agreement for Damascus airport with Qatar's UCC Holding.
A deal worth more than $2 billion for a mall and two towers, signed with Italy-based construction company Ubako.
$2 billion for a Damascus metro system with UAE support.
$6.4bn investment from Saudi Arabia.
Kuwait
Kuwait signs contracts for $3.27 billion power plant project
The Kuwait Authority for Partnership Projects (KAPP) signed contracts for phases two and three of the Al-Zour North power plant.
Once completed, the Al-Zour North project will produce 2.7 gigawatts (GW) of power and 120 million gallons of water daily using combined-cycle technology.
Construction is set to take 3 years.
News
Dubai developers bring construction in-house as demand surges
A growing number of major UAE developers are setting up in-house contracting firms.
The move is aimed at increasing control over construction timelines, costs and quality standards, and ultimately, securing a larger share of profits.
The shift comes as Dubai’s real estate surges, with prices up 70% over four years to December 2024 and a government plan to double the population to 7.8 million by 2040.
The data center report we promise you haven't read (CTVC)
The average project size (and investment) is rising rapidly.
A few years ago, 150MW was a big project. Today, 1GW is common, with the median announced investment for projects $800m.
The data center balance: How US states can navigate the opportunities and challenges (McKinsey)
Unlocking US federal permitting: A sustainable growth imperative (McKinsey)
All Hail the Humble Speed Hump (Bloomberg)
Hilton Says EV Chargers Are Top Booking Driver, Beating Pools and Free Breakfast
If I missed anything this week, please reply and let me know! I’ll make sure to include it next week.