Investor Kevin O'Leary Says Roughly 65% of North American Data Center Projects May Never Be Built; Permitted, Powered Sites Could Gain Value Through Scarcity
Investor Kevin O'Leary believes roughly 65% of announced data center projects in North America may never be completed. The real scarcity, in his view, is not insufficient compute demand but the availability of power contracts, water permits, and air approvals. He argues that AI infrastructure stock valuations should depend on project completion probability rather than total capital expenditure.
AI infrastructure stocks recently faced what appeared to be a straightforward bear case: companies like CoreWeave, Applied Digital, and IREN are pouring enormous capital expenditure into new data center campuses, much of it financed through borrowing, and investors want to know whether that capacity will ever pay for itself. CoreWeave fell about 25% in a matter of days during the recent sell-off, while Applied Digital and IREN slid roughly 50% from their summer highs, seemingly confirming the concern.
But Canadian investor Kevin O'Leary, known as Mr. Wonderful from the television show Shark Tank, argues the market is tracking the wrong variable. He estimates that roughly 65% of data center projects announced across North America in the past two years may never be built—not because demand is insufficient, but because of missing water, fiber, or power, or because of a political moratorium. He expects 60% to 65% could be shut down within 24 months. If this assessment holds, the real scarcity is not compute capacity but sites that have already cleared power and permitting hurdles.
O'Leary splits the opportunity into two verticals: power and compute/storage capacity. On power, he believes the broader economy needs far more grid capacity regardless of AI. On compute, he estimates current demand sits at roughly three times available capacity, with no slowdown in sight for three years. He notes that much of what Amazon, Alphabet, and Microsoft run through their data centers has nothing to do with AI.
The mechanics are concrete: before a tenant rolls in a single rack, the developer needs land, U.S. Environmental Protection Agency air permits, water rights, dark fiber, and power. Planning alone can run $20 million to $30 million per gigawatt. Tenant demand has also jumped—where they once asked for 250 to 500 megawatts, they now want at least 1.4 gigawatts, roughly $16 billion from scratch to operations, split about evenly between equity and debt.
Power is the hardest piece. Former crypto miners pivoted to AI because they already had grid connections, but most U.S. states now require new projects to bring their own power, usually natural gas run through turbines. Time is the hidden cost: internal rate of return depends on speed, and a site facing a three-year permit wait cannot produce a return that anyone will finance. O'Leary says tenants want capacity online by the fourth quarter of 2027, a demand he calls insatiable.
Once the power contract, water permit, and air approval are all signed, a project's value can jump sharply—this is the core of O'Leary's argument. If roughly two-thirds of announced projects fail, permitted and powered capacity becomes the prized asset, and operators already online gain leverage with a short list of about 11 major tenants.
O'Leary holds Bitzero Holdings (NASDAQ: AIBZ) in public markets for liquidity; the company has land, power, and permits in Norway and Finland. He is developing private data center projects in Box Elder County, Utah, and in Alberta, Canada. He says the theme is his largest, at well over 20% of his book. Long term, he treats data centers like commercial real estate with utility-style cash flows, targeting 17% to 22% returns in climate-controlled storage and preferring no more than 30% leverage.
Politics is the sharpest risk, in O'Leary's view. He cites polling showing more than 70% of people oppose a data center in their state, though answers shift when the site sits three miles away and offers jobs paying $150,000. With U.S. midterm elections approaching, blocking data centers can win votes.
The scarcity argument does not need every builder to succeed or AI enthusiasm to hold every quarter. It needs two conditions: compute demand to stay strong and permitting to stay hard. A sudden wave of newly permitted capacity or a hyperscaler pullback in chip spending would weaken it.
The 65% failure-rate estimate, the 3x demand gap, and the figure of about 11 major tenants all come from O'Leary's own judgment; the article provides no independent verification. O'Leary simultaneously holds Bitzero and develops private data center projects, with this theme representing well over 20% of his portfolio—a direct financial interest. The publisher, MarketBeat, also sells a $149-per-year subscription service and stock recommendations. These interests do not automatically invalidate the argument, but readers should keep this context in mind when evaluating the specific figures.