The Zhitong Finance App learned that the main data center site selection project for the new cloud computing joint venture established by Google (GOOGL.US) and Blackstone (BX.US) has been delayed, highlighting the various obstacles these two giants face in achieving their artificial intelligence (AI) ambitions.
According to reports, the startup is internally known as “Project Braid” and was launched by Kuroishi with an investment of 5 billion US dollars. The goal is to rent Google AI processors to customers in 2027. However, according to people familiar with the matter, this joint venture was hampered a long time ago. Google cancelled plans for emerging data center developer Crusoe to build a data center in Cheyenne (Cheyenne), Wyoming. They said that Google had taken over the project due to loss of confidence in Crusoe's ability to deliver and is reapplying for the relevant license. Local officials told residents that the project would be scaled down.
One of these locations is also unsuitable because they are not equipped with suitable transformers. A person familiar with the matter said that data center builders are facing a shortage of such equipment. According to a McKinsey & Co. report, the wait time for the devices in question was close to a year.
Some people familiar with the matter mentioned above also said that the shift in Texas's attitude towards data centers has also disrupted other project plans. Governor Greg Abbott ordered the suspension of new data center projects while the state is gathering more information to understand how developers and tech companies are paying for electricity.
Currently, the AI boom in the US is facing a tight power supply situation in the existing data center market. At the same time, concerns about the impact of data centers on household electricity bills and the environment are causing increasingly intense political controversy. From New York to Seattle, several projects were temporarily halted due to grid and water consumption issues.
Project Braid supporters have used their networks to find new data center locations. A person familiar with the matter said that in recent weeks, Google had sought help from executives of the new cloud companies it cooperated with. Other people familiar with the matter said that Kuroishi has also used consultants and partners to find new locations.
A person familiar with the matter said that the new cloud joint venture between Kuroishi and Google has identified 29 potential data center locations. “As the market demand for our computing power is higher than expected, we are actively expanding our project reserves to evaluate a wider range of site choices to support our long-term expansion plans,” the joint venture said in an email statement.
Project Braid executives said they aren't concerned about this. “It is very common for individual potential sites to advance at different speeds,” Benjamin Treynor Sloss, CEO of the joint venture, said in an email statement. He added that the new cloud enterprise division has taken this into account during planning, has “a range of diverse choices” and is “making strong progress.” He said the business is still expected to deliver the target 500 megawatts of capacity next year as planned.
Businesses are gradually hitting the physical limits of building AI infrastructure. Organized opposition forces are forcing policy makers to scrutinize relevant projects more rigorously, and as this year's midterm elections approach, data centers have become an influential campaign topic. J.P. Morgan Chase said in a May report that more than 60% of the data center capacity scheduled to be completed in 2027 has yet to begin construction; shortages in the supply of switchgear and skilled labor are also causing bottlenecks.
People familiar with the matter said that executives involved in Project Braid have accepted the reality that today there is only a 50% chance that a data center project will be delivered on time, compared to 90% three years ago.
This could complicate Blackstone's goal of consolidating its “world's largest digital infrastructure financier.” This will be a test for Blackstone's new AI investment division, BXN1 — a division born out of a business focused on growth equity investments. The alternative asset management company is also diversifying its investment layout. Recently, it joined other companies that promised to partner with Nvidia and invest billions of dollars to build AI infrastructure.
Meanwhile, Google is trying to make the chips running its Gemini AI model reach a wider customer base while building a hardware ecosystem to better compete with Nvidia (NVDA.US). Many of the largest new cloud companies, such as CoreWeave (CRWV.US), only run Nvidia's AI chips. To have more impact, Google needs to build more data centers for its Google Cloud and find partners to host its chips.
Google expects capital expenditure of up to $205 billion this year. The company formed this joint venture with Kuroishi to limit the direct costs of building its AI infrastructure. This arrangement will move some of the expenses and risks off the tech giant's balance sheet.