Data Centers in Nvidia’s Hometown Stand Empty Awaiting Power

Major data center developers Digital Realty Trust Inc. and Stack Infrastructure are experiencing significant delays in energizing new facilities in Santa Clara, California, dueating to insufficient power supply from the local utility, Silicon Valley Power. Digital Realty's project, applied for in 2019, and Stack's 48-megawatt facility remain vacant, underscoring a critical infrastructure bottleneck for the US tech sector and the broader economy, particularly as demand for AI-driven data centers escalates in Nvidia's hometown.

Analysis

Digital Realty Trust (DLR) and Stack Infrastructure (acquired by Blue Owl Capital, OWL) are experiencing significant operational delays in Santa Clara, California, with data centers remaining vacant for years due to insufficient power supply from local utility Silicon Valley Power. Digital Realty's project, initiated in 2019, is still awaiting full energization, while Stack's 48-megawatt facility also sits empty, highlighting a critical infrastructure bottleneck.

This situation represents a major challenge for the US tech sector and the broader economy, particularly given the escalating demand for AI-driven data centers in Nvidia's (NVDA) hometown. The inability of Silicon Valley Power to upgrade its capacity creates a severe impediment to the deployment of essential computing infrastructure. The general sentiment for DLR and OWL is strongly negative, reflecting the direct impact on their asset utilization and revenue generation.

The prolonged vacancy of these high-capital assets implies significant opportunity costs and delayed returns for DLR and OWL, tying up capital without generating expected income. This infrastructure constraint could also indirectly impact the growth trajectory of AI-dependent businesses by limiting the physical expansion necessary for processing power, despite robust demand for AI chips.

Key Decisions for Investors

• Investors in Digital Realty Trust (DLR) and Blue Owl Capital (OWL) should closely monitor progress on power infrastructure upgrades and potential revenue delays from these stranded assets.
• Evaluate the broader implications of power grid limitations on data center development and AI infrastructure growth, particularly in high-demand tech hubs.
• Consider the long-term capital expenditure plans and regulatory environments of local utilities in regions critical for tech expansion, as these directly impact data center viability.