Microsoft Exits AI Data Center Deal, SemiAnalysis Still Sees 50-Gigawatt Boom in 2027

According to the latest research from SemiAnalysis, more than 24 gigawatts of data center capacity across just 40 campuses has entered the late-stage construction phase, with the majority expected to come online in 2027.

The research firm projects that 50 gigawatts of new data center capacity will be added outside China in 2027, roughly equivalent to the industry's cumulative historical buildout in those markets through the end of 2024.

This optimistic outlook comes as Microsoft Corp. abandoned a UK data center agreement due to power delays. The 50-megawatt facility was expected to house approximately 23,000 Nvidia GB300 chips.

Why SemiAnalysis Expects the Boom to Continue

Most of the 40 campuses are more than halfway complete, with cooling and power equipment already installed.

Researchers wrote in Monday's report that "gigantic campuses are being physically built, with many projects on schedule."

Their confidence stems from a surge in long-term lease contracts. Developers typically commit only 5% to 10% of a project's budget before locking in customers, then use signed contracts to raise capital.

SemiAnalysis estimates that approximately $1 trillion worth of multi-year data center lease contracts have been signed this year, helping to fund construction planned for 2027 and 2028.

The firm also believes that "power generation issues have largely been resolved."

Instead of waiting five to ten years for grid connections, developers are increasingly installing their own power generation equipment, including fuel cells, refurbished turbines, and engines originally designed for trucks.

These alternatives may bypass the grid delays that derailed Microsoft's Essex deal, though they may not be viable in every location.

Construction speed is also accelerating. SemiAnalysis noted that Singapore-based DayOne has reduced construction timelines from over 18 months to approximately 9 months. The firm estimates modular construction can cut certain on-site labor requirements by up to 63%.

Will Chips Become the Next Bottleneck?

Not everyone shares SemiAnalysis's optimism.

Altimeter Capital founder Brad Gerstner challenged SemiAnalysis founder Dylan Patel's earlier forecast of 43 gigawatts of installed capacity on the All-In podcast.

Gerstner said, "I think Dylan's prediction of 43 gigawatts for next year is too aggressive," estimating actual delivery closer to 25 gigawatts. His comments focused on US infrastructure, while SemiAnalysis's latest forecast covers a broader market.

Meanwhile, traders on Polymarket see approximately a 9% probability of an AI industry downturn by December 31. The contract requires three qualifying events within 90 days, potentially including a 50% decline in Nvidia's stock from its all-time high.

SemiAnalysis expects memory and processor shortages to become larger constraints in 2027 and 2028.

For Nvidia, this could mean chip demand continues to outpace supply even as developers overcome the construction and power issues currently hindering projects.