DeepSeek rattled the world by affirming it’s possible to come up with artificial intelligence models while spending less. While it was welcome, it sent shockwaves, resulting in losses for semiconductor giants that have benefited from expectations that companies will spend billions of dollars on their chips and equipment.
Amazon AI Data Center
Fast forward to Amazon (AMZN) confirming it is set to spend 60% more on a data centre project in Mississippi, underscoring that we are far from having low artificial intelligence costs. The tech giant is poised to pay $16 billion to develop two new data centres needed to handle huge troves of data as part of the company’s AI initiatives.
When Amazon first announced the Mississippi data centre project, it proposed spending $10 billion. The additional $6 billion underscores the escalating costs as the AI race heats up. According to state planning documents dated January, servers, fibre-optic cable, and other technology infrastructure will account for the majority of Amazon’s projected spending, which is $7.2 billion. By the end of next year, the state anticipates spending $16 billion.
AI Spending Spree
In order to increase computing capacity, cloud providers such as Amazon Web Services, Microsoft Corp (MSFT) and Alphabet (GOOGL) are investing tens of billions of dollars in building new data centres packed with top-tier chips and computer servers throughout the United States. According to local officials and businesses, the projects will generate well-paying jobs and strengthen local economies.
The data center construction boom is anticipated to rise in the upcoming years despite some investors questioning the industry’s significant investments in AI infrastructure. OpenAI, Oracle (ORCL). And SoftBank Group has announced a $100 billion infrastructure venture dubbed Stargate. Additionally, Microsoft stated in its quarterly financial results on Wednesday that a shortage of data centres is hampering its capacity to meet the demand for its AI services and products.
OpenAI Capital Raise
Meanwhile, OpenAI is looking to raise $40 billion in a funding round that would end up valuing it at $340 billion. The funding round would double its value compared to its last funding round last October. Early indication is that Softbank could invest between $15 billion and $25 billion into the funding round as it looks to be a key player in a company increasingly shaping the AI revolution.
Softbank would not be the first, let alone the last, company to pump billions of dollars into the ChatGPT maker. Last year, Microsoft (MSFT) invested about $14 billion in the company. With the investment, the software giant has gained access to valuable AI innovations that it is using to enhance its product portfolio.
OpenAI and other leading AI companies have pledged to invest billions of dollars in data, talent, and physical infrastructure to support the development of increasingly sophisticated AI systems. Likewise, Chinese startup DeepSeek has released a competitive model that it claims to have developed for a small fraction of the price, raising doubts about that spending binge.
Separately, ElevenLabs, a startup that uses artificial intelligence to replicate voices, raised $180 million in a funding round, valuing it at $3.3 billion. Some big names that participated in the funding round include Andreessen Horowitz, Iconiq Growth, NEA and Sequoia Capital.
