COMMENTARY:
AI, or artificial intelligence, is promising to be the next breakthrough in the annals of human invention, on par with the automobile, airplane, and computer. Billions of human beings rely on their cell phone or computer to look up everything from the nearest Italian restaurant to a list of major businesses in every country. Most modern cell phones even have an AI mode as an option to search for information, even though many of us simply activate the microphone in our cell phone to make inquiries. How many of us have an Alexa or Siri virtual assistant in our homes or offices that help us search for information in real time? This is AI in action.
Companies are using AI in their everyday operations to streamline processes, make good decisions based on an analysis of information, and to help shore up their labor force when the labor market is tight. I have a friend in Juarez who left me impressed when he showed me how he is using AI in his production and distribution operations. He is betting 100 percent that AI will make his company more efficient, profitable, and competitive in the future.
Using AI, I found out that the U.S. has the most data centers in the world with 5,381. Rounding out the top five are Germany (521), the U.K. (514), China (449), and Canada (336). Our southern neighbor Mexico ranks 11 on the list with 170 data centers. I was surprised that the U.S. has such a dominant position in data centers compared to the rest of the world. In fact, using simple arithmetic, the U.S. has more data centers than the next 24 countries combined. It is apparent that Americans are demanding quick, accurate information in order to make decisions in their daily lives.
Data centers are popping up in the least obvious places. I recently read a Bloomberg report about how Malaysia’s palm oil producers, which have long been cited for deforestation and pushing animals to the brink of extinction, are now repurposing their fields in order to attract data centers. This is considered a greener approach to development. Malaysia has now become the fastest data center market in the Asia-Pacific region, accounting for approximately 40 percent of data center capacity planned in Southeast Asia. In the past four years, Malaysia has received more than $34 billion in data center investment.
However, data centers do not come without certain concerns. They run 24/7 and the servers generate a lot of heat. They typically have been cooled down using water. Some data centers can use more than one million gallons per day just to keep the servers cool and running. More modern data center projects have started to use closed-loop cooling systems in which the data center coolers are filled with water that is then recirculated, thus using substantially less water than older systems.
The other major concern is the power needed to keep the data centers constantly running.
According to AI, data centers currently use about 3 percent of global electricity. In the U.S., this figure is currently 4.4 percent, which is projected to grow to 12 percent by 2028. This steep increase is not only to cool the data centers, but to power the servers.
There are also concerns about whether the whole data center industry will go the way of the tech bust that occurred approximately 20 years ago. There is constant debate about whether data centers will keep making individuals and companies incrementally more efficient and productive, or they will hit a peak where the amount being invested is not worth the value they are providing.
On the positive side, data centers have triggered an economic multiplier effect with firms not directly involved in their operations. A recent report stated that the French company Schneider Electric, which has major operations in El Paso, Texas, has signed two deals to supply Switch and Digital Reality with approximately $2.3 billion in modules, cooling systems, uninterruptible power supplies, and switchgear. The multiplier effect continues into Santa Teresa, New Mexico, with no fewer than three manufacturers supplying Schneider with the components it needs to make these data center products.
The Borderplex region (El Paso, Texas; Juarez, Chihuahua; and Santa Teresa, New Mexico) is also riding the data center boom. In northeast El Paso, Meta is currently constructing a $1.5 billion data center, that when finished will comprise 1.2 million square feet and employ 100 workers. As part of the $500 billion Stargate Project, which aims to build multiple data centers across the country, Oracle and Open AI are building four data centers in Santa Teresa, New Mexico, comprising approximately 3 million square feet, at an investment of up to $165 billion over the next three decades. It is estimated that this project will create 750 jobs. The project will be building its own electric micro-grid for power generation and using a closed-loop cooling system.
To put the Santa Teresa data center investment figure into perspective, in 2024, New Mexico’s total GDP was approximately $112.8 billion. According to AI, if you took all of the assets that Union Pacific owns, they would total approximately $137.51 billion, which is its market capitalization. It is hard to contemplate a $165 billion investment, which is mind-boggling.
Despite the concerns over data centers and their resource needs, the data center boom is definitely occurring and seems to be with us for the foreseeable future. They will be a major part of the U.S.’s ability to economically compete in the world and to defend its interests.
Jerry Pacheco is the president of the Border Industrial Association.
Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.