How the $500B “Stargate” AI Initiative Impacts Businesses Seeking Data Center & Colocation Space

The demand for AI-ready data centers is surging, and a new $500 billion private-sector investment led by OpenAI, SoftBank, and Oracle is set to reshape the colocation landscape. Announced by President Donald Trump, the “Stargate” initiative will build 10 AI-optimized data centers in Texas, with more to follow. While this is great news for AI innovation, it raises a critical question for businesses looking for traditional colocation space: How will this impact availability, pricing, and competition in the data center market?

What is the “Stargate” Initiative?

The “Stargate” project is a massive effort to build AI-focused data centers capable of handling high-density, compute-intensive workloads. Oracle will provide cloud infrastructure, while SoftBank and OpenAI will drive investment and AI innovation. The first 10 data centers in Texas will support next-gen AI models, machine learning applications, and large-scale computing.

While this is a game-changer for AI, it could also have ripple effects across the colocation and data center market—particularly for businesses seeking space for traditional IT workloads.

What This Means for Businesses Looking for Colocation Space

1.Increased Demand Could Lead to Higher Prices

With billions being invested in AI data centers, competition for power, land, and fiber connectivity is intensifying. This could lead to:

  • Higher colocation costs in certain regions as demand for power and cooling rises.
  • Limited availability of high-quality data center space, especially in major hubs like Dallas, Phoenix, and Northern Virginia.
  • A shift in colocation provider strategies, with more facilities catering to AI workloads rather than traditional enterprise IT needs.

2. AI-Centric Builds May Reduce Traditional Colocation Options

Traditional colocation customers—businesses looking for rack space, cabinets, or private cages—may find that:

  • Data center providers prioritize AI-driven hyperscale deals over smaller enterprise deployments.
  • AI-focused builds require liquid cooling, high-density power, and specialized networking, making it harder for standard enterprise IT workloads to fit into these facilities.
  • Some colocation providers may raise power density requirements, making low-to-mid power deployments more expensive or impractical.

3. Potential Opportunities for Mid-Sized Data Centers & Secondary Markets

While hyperscalers dominate large metros, businesses looking for affordable colocation space may benefit from:

  • Mid-sized and regional data centers offering more enterprise-friendly pricing and flexible leasing options.
  • Secondary markets (e.g., Columbus, Salt Lake City, Austin, Charlotte) becoming attractive as companies look for cost-effective colocation with strong connectivity.
  • Retail colocation providers adapting their offerings to accommodate businesses needing reliable multi-cloud access and hybrid IT infrastructure.

4. Power Availability Could Become a Bottleneck

With AI data centers consuming massive amounts of power, businesses looking for colocation space should:

  • Assess power availability early—facilities with stable, long-term power contracts will be in high demand.
  • Consider green energy options—renewable energy sources may become a differentiator as AI-driven power usage increases.
  • Explore edge and distributed colocation solutions to balance workloads across multiple locations.

How to Secure the Right Colocation Space Amid Industry Shifts

If your business is looking for colocation space, now is the time to:

✅ Evaluate your needs: Determine power, space, and connectivity requirements before prices rise.

✅ Look beyond primary markets: Secondary data center markets may offer more availability at competitive rates.

✅ Consider hybrid cloud strategies: Pairing colocation with cloud services can provide scalability and cost-efficiency.

✅ Work with data center experts: Navigating the evolving landscape requires insight into pricing trends, availability, and long-term stability.

Conclusion

The “Stargate” initiative is a major milestone in AI infrastructure development, but it also raises important considerations for businesses seeking traditional colocation space. As demand for AI-ready facilities grows, pricing, availability, and competition will shift—making it crucial for businesses to plan ahead and secure the right data center space before the market tightens.

Need help finding the best colocation or data center space for your business? Explore our data center directory to compare options and connect with providers that fit your needs.