Amazon to Plow Extra $35 Billion Into Virginia Data Centers in Cloud Race

(Bloomberg) — Amazon.com Inc.’s cloud unit. will spend $35 billion on new data centers in Virginia by 2040, underscoring its determination to stay ahead of rival Microsoft Corp. and Alphabet Inc.

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Investments in many areas will create about 1,000 jobs in Virginia, the state said in a statement released Friday. Virginia is a key hub for Amazon Web Services, where dozens of data centers power applications from customers throughout the Eastern US. More sites are being considered and will be selected later, the state said.

AWS is the world’s largest provider of cloud computing and last year incurred about $28.4 billion in capital expenditures, according to analysts at BofA Securities. Amazon’s division sells power processing and software services to governments and companies, and encourages them to outsource their data centers in favor of on-demand computing equipment from Amazon’s servers.

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Northern Virginia has long been a hub for Internet infrastructure. The region’s relatively cheap energy — important for power-hungry server farms — and federal tax breaks also make the area attractive to companies looking to build data centers.

Amazon has been given incentives to expand its footprint in Virginia and will qualify for a 15-year extension to the tax exemption for equipment and software installed in new locations, the state said. The cloud unit is also likely to receive up to $140 million in operating grants, subject to state government approval, to complement investment in infrastructure and workforce development.

“This is big. And $35 billion is the largest ever made in the Commonwealth of Virginia,” said Governor Glenn Allen Youngkin in an interview with Bloomberg Television. “There are discussions to represent the taxpayers of Virginia in a fair and reasonable manner. That’s my job. And I think we did a very good thing. “

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Youngkin added that the deal would be good for his state, despite the tax break given to Amazon.

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The cloud provider opened its first cluster of data centers and offices in the state in 2006 and has invested $35 billion there since 2011. AWS does not disclose the number or exact location of its data centers, citing trade secrets and security concerns. Amazon is also building a second headquarters campus in Arlington, Virginia.

On Wednesday, AWS parent company Amazon began its latest round of layoffs that will affect 18,000 employees worldwide. Downsizing focused on divesting stores and human resources. Last year, in the first wave, Amazon’s device business was hit hard.

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A senior cloud executive told Bloomberg News in November that AWS would only scale back investments in data centers if demand slows. Analysts at BofA Securities estimate that the unit will spend about $27 billion in capital expenditures this year and $30 billion in 2024, excluding capital leases.

Youngkin told Bloomberg that Amazon’s job cuts, including some in his state, were troubling but that he was confident in the cloud division’s commitment to continuing to invest and grow in Virginia.

(Updates on comments by the governor of Virginia beginning in section six)

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