Price Tag for Amazon’s Mississippi Data Centers Jump 60% to $16BPrice Tag for Amazon’s Mississippi Data Centers Jump 60% to $16B

(Bloomberg) -- Amazon is expected to spend 60% more than previously announced on a massive data center project in Mississippi, underscoring the escalating costs for artificial intelligence infrastructure.

The company will spend $16 billion to construct two data center campuses north of the state capital Jackson, according to state planning documents reviewed by Bloomberg. When Amazon announced the project a year ago, the company put the price tag at $10 billion and called it “the single largest capital investment in Mississippi’s history.”

Across the US, cloud providers like Amazon Web Services, Microsoft and Alphabet’s Google are spending tens of billions of dollars to expand computing capacity by constructing new data centers crammed with high-end chips and computer servers. Companies and local officials say the projects will boost local economies and create well-paid jobs.

“It truly is an opportunity for us to diversify our economy,” Mississippi Governor Tate Reeves said when he announced the Amazon project last January.

But despite all the tax breaks and other incentives being lavished on the project, the state expects most of the jobs created to be filled by contractors, the previously unreported documents show. They also reveal how data center costs keep getting bigger, owing in large part to the need for expensive equipment from suppliers like Nvidia.

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The largest chunk of Amazon’s planned spending – $7.2 billion – will go toward servers, fiber-optic cable and other technology infrastructure, according to the January-dated state planning documents. The state expects the $16 billion to be spent by the end of next year.

Mississippi gave Amazon tax breaks and $278 million of incentives in the form of infrastructure upgrades and workforce training.

Most of the state’s direct outlay – $172 million – is earmarked for proposed sewer upgrades such as a new wastewater treatment facility that can handle 8 million gallons per day, the documents show. Data centers generate significant waste water keeping the facilities and power-hungry servers cool. 

In addition, Mississippi waived taxes on income derived from the data center, purchases made related to the data center and will reimburse 3.15% of company construction costs. The sales tax exemptions will total about $558 million, according to a spokesperson at the Mississippi Development Authority. The sales tax exemptions include big-ticket items such as servers, including chips from Nvidia.

In lieu of taxes, Amazon will pay fees to the county, the documents show. During the first five years of the project, the state estimates Amazon’s fees will be about $209 million, according to the Mississippi Development Authority spokesperson. The state has said these fees will repay much of the incentive package and that the project will boost ancillary industries such as construction, housing and entertainment. 

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Amazon declined to comment on the figures in the documents, and a spokesperson referred to the company’s statements at the time the deal was announced. The company estimates the investment will add some $3.3 billion to the state’s gross domestic product. 

Tax breaks and other incentives for data centers have come under greater scrutiny from politicians due to concerns that these projects generate comparatively few jobs.

Amazon has said the Mississippi project will create at least 1,000 full-time jobs. But the documents show that almost two-thirds of them will be filled by contractors, not Amazon employees with company benefits. Full-time headcount, including contractors, will hit 1,000 in 2027 then remain flat, the state documents show. The workers will initially make about $80,000 a year.

While some investors have begun to question the industry’s heavy outlays on AI infrastructure, the data center building boom is expected to accelerate in the coming years. At a White House event last week, OpenAI, Oracle, and SoftBank announced a $100 billion infrastructure venture dubbed Stargate. And when Microsoft reported quarterly financial results on Wednesday, the company said a lack of data centers is hampering its ability to handle demand for its AI products and services.

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