Google, Blackstone Venture Faces Delays at Data-Center Sites

(Bloomberg) -- Alphabet Inc. and Blackstone Inc.'s new cloud venture has hit delays for major data-center locations that were supposed to run Google's chips, underscoring the obstacles standing in the way of Big Tech's AI ambitions.

The startup — known internally as "Project Braid" — was launched with $5 billion from Blackstone and aims to rent Google AI processors to customers in 2027. The business joins a growing number of neoclouds, entities that lease chips and computing capacity.

The venture faced an early snag when Alphabet's Google scrapped a plan for upstart data-center developer Crusoe to build sites in Cheyenne, Wyoming, according to people familiar with the matter, who asked not to be identified discussing confidential details. Google took over the project and is reapplying for permits after losing confidence in Crusoe's ability to deliver, the people said. Local officials told residents the project will be scaled down.

Another site was unsuitable because it wasn't stocked with the right transformers, one of the people said. Data-center builders are facing shortages of such equipment, with wait times of almost a year, according to a McKinsey & Co. report.

Texas' turn against data centers upended other plans, some of the people said. Governor Greg Abbott ordered a freeze on new projects while the state collects more information about how developers and tech companies pay for electricity.

Project Braid executives say they're unfazed.

"It is very common for individual potential sites to progress at different rates," Benjamin Treynor Sloss, the venture's chief executive officer, said in an emailed statement. The neocloud factored that into planning, has a "diversified set of options" and is making "strong progress," he added.

He said the business is on track to deliver its targeted 500 megawatts next year.

Google declined to comment, while Blackstone referred to the joint venture's emailed statement. Crusoe, best known for OpenAI and Oracle Corp.'s flagship Stargate facility in Texas, didn't reply to messages seeking comment.

Companies are running into the physical limits of building out AI infrastructure.

Organized opposition is forcing policymakers to scrutinize projects more vigorously, and data centers have become a potent campaign issue ahead of this year's midterm elections. More than 60% of the capacity planned for completion in 2027 has yet to begin construction, JPMorgan Chase & Co. said in a May report. Supply shortages for switchgear and skilled labor are also creating bottlenecks.