Banks Are Putting Big Money Behind Data Centers, Sending Land Prices Soaring

Banks are backing AI with unprecedented loans. That not only includes putting their money behind start-ups and fostering AI within their own organizations but helping developers secure huge construction loans to build AI data centers that provide the spine for AI to function.

In one of the biggest construction loans in recent years, JPMorgan Chase JPM and Starwood Property Trust STWD have agreed to lend $2 billion to a venture of CIM Group and Novva Data Centers to construct a 100-acre data campus in West Jordan, Utah, outside Salt Lake City, The Wall Street Journal reported.

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Enough Energy To Power 175,000 Average Sized Homes

The owners have secured a power deal with the local electricity company, enabling the facility, when completed, to provide 175 megawatts of continuous service, enough energy to power 175,000 average-sized homes. The deal marks the second loan to enable data center construction of over $2 billion this year, following JPMorgan’s loan of $2.3 billion for a facility in Abilene, Texas. It marks a huge jump in the scale of loans, which until recently was $1 billion or less, and often half that amount. 

Nvidia Chips Are Central To Data Center Spending

The advancement in AI chips that consume more power has led to an increase in data center sizes and, thus, the size of the loans. Big-name companies are willing to sign on to lease the centers ahead of their construction, thus encouraging banks to lend.

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The leading manufacturer of AI chips, Nvidia NVDA, recently reported revenue was up 78% over the previous year, resulting in $21.08 billion in profit. Nvidia’s massive profits come from tech’s major players spending increasing money on data centers. After huge investments on infrastructure in 2024, Amazon AMZN, Microsoft MSFT, Alphabet GOOG GOOGL)), and Meta META have said they will each spend $65 billion to $100 billion or more this year on data centers, with Nvidia chips central to their planning. Nvidia’s data center revenue includes the sale of chips, cables, and high-performance computing. It rose 93% to $35.58 billion in the quarter from a year earlier.  

“Nobody is backing off their commitment to build AI data centers and the power to generate more electricity for those data centers,” Brian Mulberry, client portfolio manager at Zacks Investment Management, a financial firm that tracks Nvidia, told the New York Times. “Everyone is still competing.”

Unprecedented Scale Of Construction

Choosing where to locate these vast data centers has been an ongoing issue with welcoming local governments, minimal public opposition, and sufficient power and water central necessities. It means that development often occurs in areas unused to this scale of construction. Meta announced recently that it was planning a $10 billion data center in Richland Parish, Louisiana. Last year, Google began construction on two data centers in Dorchester County, South Carolina, as part of a major expansion effort in that state.   

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Impervious To Market Conditions

According to the Associated Builders and Contractors website, commercial real estate spending has been sluggish in a turbulent environment of high interest rates and tariffs. The biggest area of growth has been in data centers, which have seemed impervious to market conditions, accounting for more than 75% of the overall monthly gain, said Anirban Basu, ABC’s chief economist.

“Data center construction spending increased another 1.9% for the month, accounting for more than three-fourths of the monthly increase in nonresidential activity,” Basu wrote on his company’s website. “While that segment is so hot that it can melt through the effects of high interest rates, many other categories appear to be frozen in place. Even manufacturing, which still accounts for nearly $1 in every $5 of nonresidential construction spending, is virtually unchanged since May of last year.”

Expect the data center boom to continue. Tech giants OpenAI, Softbank, and Oracle ORCL announced a joint $500 billion initiative at a media event held at the White House. The plan includes the construction of up to 20 data centers by 2028.

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