Our Internet-connected world relies on data. And we couldn't satisfy our data cravings without the Washington, D.C., suburbs...
You see, around 300 data centers operate in Loudoun, Fairfax, and Prince William counties in Virginia. The area is widely known in the tech industry as "Data Center Alley."
Importantly, Data Center Alley is growing to meet our collective data needs...
America Online – or AOL, for short – was one of the first big companies on the scene in the 1990s. But that was just the start...
One of the first "peering exchanges" relocated to the area in 1998. (A peering exchange allows two independent networks to directly connect and exchange Internet traffic.)
This development set the tone for a still-ongoing megatrend. More than 25 years later, Data Center Alley remains one of the hidden-yet-critical corners of our online world...
Around 70% of the world's Internet traffic flows through this area today. That's huge.
And AOL's old stomping grounds will play a key role in making everything work...
The company's campus in Virginia remained vacant from the mid-2000s through the past few years. Now, a new player is demolishing the buildings to build a huge data center.
That's right...
AOL has come full circle in helping to create a doorway to the Internet.
The latest announcement came in January 2022...
AOL's former complex will soon house a brand-new data center. It will stretch roughly 1.2 million square feet. And it's going to be known as PowerHouse Pacific.
Demolition of the old AOL buildings began last October. The new data center should start operating near the end of 2026.
Here's where this story gets more exciting for us...
This data-center project and others like it will require a lot more electricity – and fast.
The site will include its own substation. It will deliver 300 megawatts ("MW") of capacity. Upon completion, 90% of this substation's capacity will power the data center alone.
Our need for more power won't end there, either...
People didn't even talk about kilowatts ("kW") and servers together when AOL started back in the 1980s. Computers simply didn't draw that much power.
By the 1990s, a "server rack" would draw between 1 and 3 kW of power. That seemed like a lot at the time. But in comparison, today's demands are massive...
Modern server racks consume more than 100 kW. That's an increase of roughly 100 times over the past 25 years.
And thanks to the new artificial intelligence ("AI") craze, demand will only keep growing...
The International Energy Agency ("IEA") found that AI and cryptocurrency computing already account for 2% of the world's power demand. More importantly, the IEA believes these two sources of power demand could double from their current levels by 2026.
That creates a major problem...
You see, the entire Internet depends on suburban Virginia's power plants to keep flowing. And now, thanks to AI and other tech advancements, we need more data-processing power.
Folks, the secret is out...
The electrification of America is on the rise again.
We're building more data centers to meet our ever-increasing appetite for content – from the Internet to AI to cryptocurrencies and beyond. That also means we need a lot more electricity.
This opportunity starts with the broader utilities space. And the Power Gauge agrees...
Our one-of-a-kind system turned "bullish" on the Utilities Select Sector SPDR Fund (XLU) a few weeks ago. And it doesn't look like it will stop marching higher anytime soon...
Earlier this year, almost no one would've predicted that a "defensive" sector like utilities would create one of the hottest opportunities available. But that's exactly what we're seeing right now.
I said it last week, and I'll say it again today...
If you're not paying attention to this sector, I recommend you check it out.
Good investing,
Pete Carmasino
