The Stack Archive News Article

Analyst forecast knocks U.S. data centre leaders stock price

Fri 15 Sep 2017

Major data centre players in the U.S. saw a drop in stock prices this week following a statement from the head of a major venture capital firm arguing that data centres are on the decline.

Founder and CEO of VC firm Social Capital, Chamath Palihapitiya, stated on an investor’s conference call that advances in chip technology means that data centres will soon become unnecessary. He is reported to have said: ‘We can literally take a rack of servers that can basically replace seven or eight data centres and park it, drive it in an RV and park it beside a data centre.’

The statement sent the price of all the major data centre providers, including Digital Realty, Equinix, QTS and CyrusOne tumbling by between two and three percent. However, representatives from these companies, and other industry insiders, have rejected the claims.

Digital Realty SVP of investor relations, John Stewart, told Data Centre Knowledge that other investors had been spooked by the statement: “Andy Power and I are in New York, meeting with our largest institutional investors, and this topic has come up as basically the first question every single meeting.”

However, he also noted that major customers such as Apple, Amazon and Microsoft “are spending billions of dollars on incremental new data centre CapEx, and they are doing that and signing leases with us for ten to 15 years.” They don’t think their data centre’s going to go away.”

There has been significant progress in chip technology, with Google releasing Tensor Processing Unit (TPU) chips, in order to avoid having to build data centres specifically for performing AI functions such as neural networks. However, this has not delayed Google’s investment in data centres, with the company having announced several new data centres across the world in recent months.

DuPont Fabros VP of investor relations, Steven Rubis, called the predictions an ‘oversimplification. There’s probably more nuance to it; we get this argument from investors all the time.’

One of the major data centre firms that suffered a stock price drop, Digital Realty, recently announced an extension of its facilities in Sydney, as part of a strategy to pursue development in the APAC region.


business Data Centre news U.S.
Send us a correction about this article Send us a news tip