Concrete Intel: Data Centers

Hello Brick Brief readers,

Thank you for your continued support. With markets closed for Good Friday, we’re taking the lull to launch our first bi‑weekly edition of Concrete Intel, a quick pulse check on the sectors we track most closely. We begin with data centers, where AI demand is still red‑hot even as rising costs and tariff-driven economic uncertainty cloud investor conviction.

April 25 Update: 

Despite concerns over AI CapEx overspending and broader economic uncertainty, new developments suggest data center demand and infrastructure investment remain strong. QTS announced a $780M Texas expansion backed by Blackstone, while Stonepeak launched a $1.5B build-to-suit platform targeting Tier I and II metros, both moves that signal ongoing institutional conviction in AI-driven growth (CoStar, GlobeSt). Amazon paused select colocation leases amid post-buildout digestion, but its U.S. pipeline still totals 23 GW, reflecting long-term commitments (CommercialObserver). On April 24, Amazon and Nvidia reaffirmed sustained power demand from AI applications with no slowdown in construction or energy forecasts, which reinforces expectations of continued momentum even as markets brace for volatility (CNBC)

The data center sector continues to show powerful long‑term growth signals, but the short‑term picture has become more nuanced. While AI demand remains strong and institutional capital is accelerating, uncertainty around hyperscaler CapEx execution has emerged as the key variable to watch. Business uncertainty, recession risk, and the tariff wave now threaten to slow AI‑related investment by major tech companies, leaving developers and investors operating in a market with solid fundamentals but rising near‑term risk.

Microsoft Pares Expansion

Microsoft is at the center of this uncertainty. On February 24, the company reiterated its plan to invest $80B in AI, underscoring its long‑term commitment to infrastructure, but also signaled that project timelines and locations may shift in response to economic headwinds (CNBC). Just over a month later, on March 27, Microsoft canceled 2 gigawatts of leased data‑center capacity (Bisnow), and on April 15, it delayed a $1B project in Catawba County, North Carolina, citing broader economic caution (BizJournals). These moves suggest a shift in strategy, with Microsoft prioritizing capital discipline over aggressive expansion in the face of cost volatility.

Capital Markets React

This caution is echoed in capital markets. CoreWeave, an AI‑focused cloud‑infrastructure firm, originally aimed to raise $2.7B in its March IPO but ended up raising just $1.5B (Bloomberg, March 27). While the offering still raised significant capital, the result reflects growing investor scrutiny toward high‑cost infrastructure plays amid macro uncertainty.

Cost Inflation & Tariff Uncertainty

Meanwhile, construction costs are rising sharply. Following the April 2 tariff wave, developers have seen notable price increases across essential inputs, including steel, copper, and electrical equipment. CoStar reported on April 4 that these cost hikes are already slowing projects and forcing developers to reevaluate timelines, financing, and leasing strategies. Beyond cost inflation, the broader business uncertainty introduced by tariffs has further clouded the investment picture, encouraging some firms to delay or scale back development plans until policy clarity improves—an effect already reflected in Prologis’ recent decision to cut up to $1B from its pipeline despite strong growth from its data center and solar energy businesses (Bisnow & CoStar).

Supply‑Demand Fundamentals

Despite these short‑term pressures, long‑term fundamentals remain exceptionally strong. North American data‑center vacancy hit a record low of 2.6 percent in 2024, according to JLL (March 9). Rents rose 12 percent year‑over‑year in 2024, with some tenants facing 30 to 50 percent increases in high‑demand markets such as Northern Virginia and Phoenix (Bisnow, March 12). Institutional capital continues to pour in, with PGIM raising a $2B fund focused on AI infrastructure (Bloomberg, April 2), STACK Infrastructure securing $4B in green financing (IREI, March 20), and Principal Asset Management closing $3.6B in February for hyperscale deployment (BusinessWire, Feb 28).

Hyperscaler Commitments

On the hyperscaler side, Amazon and Google have reaffirmed their combined $175B  in planned 2025 data‑center spending amid tariff concerns, citing surging AI demand as justification to continue building at scale (Bisnow, April 11). Microsoft, while adjusting its pace, has maintained its $80B CapEx target for the year. Most notably, Nvidia is planning to build AI servers worth up to $500B in the U.S. over the next four years, a staggering figure requiring massive amounts of new data‑center infrastructure (Reuters, April 14).

Policy Tailwinds

Federal policy is also becoming more supportive. On April 3, the Department of Energy identified 16 federal land sites for expedited data‑center development, part of an initiative to streamline permitting and expand grid access for AI‑related infrastructure (Bisnow).

Outlook

The long‑term drivers behind data‑center expansion—AI, cloud computing, and digital‑infrastructure modernization—remain fully intact. But the next few months will be crucial. Earnings reports and mid‑year updates from major tech firms will clarify whether recent pullbacks were isolated or part of a broader AI‑investment recalibration. Developers and investors are watching closely to see if projected CapEx turns into real groundbreakings and leasing activity. At the same time, escalating business uncertainty, recession fears, and tariff‑driven cost inflation could push hyperscalers to moderate spending, slowing the translation of headline budgets into on‑the‑ground construction this year. If Big Tech does pull back, expect vacancy rates to rise modestly from record lows and rent growth to cool, especially in secondary markets, until new demand from enterprises and edge users absorbs the slack.