Why New AI Data Centers May Not Bring a Jobs Bonanza

Summary

WSJ What’s News: Episode Summary Title: Why New AI Data Centers May Not Bring a Jobs Bonanza
Release Date: February 26, 2025
Host: Alex Sosale
Producer(s): Pierre Bienname, Anthony Banci
Supervising Producer: Michael Kosmides

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1. Introduction and Key Highlights

In this episode of WSJ What’s News, host Alex Sosale delves into the multifaceted landscape of current events influencing global markets and society. Key topics include President Trump’s defense of Elon Musk’s cost-cutting measures in the government, the actual job creation potential of new AI data centers, the impact of increased aluminum tariffs, a concerning measles outbreak in Texas, Nvidia’s impressive financial results, China’s Belt and Road Initiative, and the rise of super billionaires.

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2. President Trump Defends Elon Musk’s Cost-Cutting Efforts

Timestamp: [00:03] - [01:09]

President Trump, in his first cabinet meeting of his second term, publicly supported Elon Musk’s initiatives to reduce government spending. Musk, present at the meeting, was lauded by Trump for his role in streamlining governmental operations.

Notable Quote:

“We're cutting down government, we're cutting down the size of government. We have to. We're bloated, we're sloppy. We have a lot of people that aren't doing their job. We have a lot of people that don't exist.”
– President Trump [00:58]

Despite the president’s praise, internal feedback from the Cabinet was non-committal, with members laughing and showing no signs of dissent. However, senior agency officials have responded by instructing federal workers to ignore Musk’s directives requesting weekly performance bullet points.

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3. Aluminum Tariffs and Industry Impact

Timestamp: [01:09] - [03:54]

President Trump announced a significant increase in duties on imported aluminum, raising tariffs from 10% to 25% effective March 12. This policy aims to protect the $92 billion U.S. aluminum industry but has created a divide between producers and buyers.

Discussion with Bob Teda:

• Producers’ Perspective:

  • Tariffs allow domestic producers to raise prices by making imports more expensive.
  • Tom Doton: “Producers have generally been in favor of them because tariffs create higher import prices. So it allows your domestic producers to raise their prices as well.”
    [02:06]
  • However, not all producers support the tariffs. For example, Alcoa faces challenges due to its operations in Canada, which exposes it to tariffs when shipping aluminum to the U.S.

• Buyers’ Perspective:

  • Companies using aluminum for products like cans and automotive parts oppose the tariffs due to increased costs.
  • Tom Doton: “It's a variety of companies that make things out of aluminum. So aluminum cans, automotive parts, the automotive industry, the carmakers, they all use aluminum as well.”
    [02:38]

• Impact on Supply and Prices:

  • With 60% of U.S. aluminum consumption being imported, tariffs could strain the availability of high-purity aluminum.
  • Tom Doton: “It would raise profits for companies that are producers because the tariff would get kind of passed through the supply chain and of course it ends up with consumers.”
    [03:30]

The discussion underscores the complexity of imposing tariffs, balancing industry protection with potential consumer cost increases and supply shortages.

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4. Measles Outbreak in West Texas

Timestamp: [04:01] - [04:23]

A tragic incident occurred as a child in West Texas succumbed to measles, marking the first death in an ongoing outbreak that has affected nearly 140 individuals across Texas and New Mexico. The outbreak primarily impacts unvaccinated children, highlighting the rapid spread of measles in communities lacking high vaccination rates.

Key Points:

• Vaccination Status: Most infected Texans are either unvaccinated or their vaccination status is unknown.
• Hospitalizations: At least 18 people have been hospitalized.
• Public Health Implications: The outbreak exemplifies the dangers of declining vaccination coverage and the ease with which measles can proliferate in susceptible populations.

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5. U.S. Markets and Nvidia’s Stellar Performance

Timestamp: [04:23] - [05:39]

U.S. stock markets exhibited mixed performance, with the Dow Jones Industrial Average declining by approximately 0.4%, the Nasdaq rising by about 0.25%, and the S&P 500 remaining flat. Amid this uncertainty, Nvidia reported exceptional quarterly results, surpassing Wall Street’s expectations.

Nvidia’s Financial Highlights:

• Sales: Increased by 78% to $39.3 billion.
• Net Income: Rose by 80% to $22 billion.
• Outlook: Nvidia’s forecast for the current quarter exceeded predictions, signaling sustained demand for their AI chips despite a prolonged boom.

The strong performance underscores the enduring investor confidence in AI-driven technologies and their pivotal role in the tech sector’s growth.

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6. Geopolitical Influence: China’s Belt and Road Initiative

Timestamp: [05:39] - [06:14]

The episode touches upon China’s expansive Belt and Road Initiative (BRI), which involves over 150 countries and investments exceeding a trillion dollars in infrastructure projects like dams, bridges, and railways. This initiative significantly enhances China’s global influence by fostering economic cooperation that aligns with its strategic interests.

Insights from Catherine Clark:

• Economic Cooperation: China leverages BRI to create economic interdependencies that further its geopolitical objectives.
• Western Response: According to Catherine Clark, the Western world has provisionally addressed China’s maneuvers but only with partial and fragmented strategies.

Notable Quote:

“The Western world has come up with only partial answers.”
– Catherine Clark [06:01]

Listeners are encouraged to explore more on this topic through “Building Influence Sundays” on the WSJ What’s News podcast.

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7. The Reality Behind AI Data Centers and Job Creation

Timestamp: [06:14] - [08:59]

A significant portion of the episode is dedicated to evaluating the promises versus the realities of job creation through the expansion of AI data centers. While political leaders, including President Trump, claim that new data centers will generate substantial employment opportunities, WSJ reporter Tom Doton provides a more nuanced perspective.

Key Points Discussed:

• President Trump’s Claims:

  • At a press conference for the Stargate project, Trump asserted that over 100,000 jobs would be created almost immediately due to new data centers.

• Tom Doton’s Analysis:

  • Employment Numbers: The Stargate project in Abilene, Texas, projected to create around 100 permanent jobs upon completion. In contrast, a cheese packing plant in the same area is expected to generate 500 jobs.
  • Construction vs. Long-Term Employment: Building data centers is labor-intensive, employing thousands during construction. However, the permanent workforce remains minimal post-construction.
  • Economic Impact: In rural areas, even 100 jobs can be significant, potentially doubling local employment rates. Conversely, in urban settings, the impact is negligible.
  • Resource Consumption: Data centers require substantial resources, prompting questions about whether the benefits of a small number of jobs justify the environmental and infrastructural costs imposed on local communities.

Notable Quotes:

“It really is important how big your friend circle is.”
– Tom Doton [05:47]

“The process of building a data center is very labor intensive. Thousands sometimes of construction workers will be on site to prop these things up, build them, install the computers. But long term, the actual people who are full time employees once the data center is built is far smaller.”
– Tom Doton [07:56]

The discussion emphasizes that while data centers are crucial for powering AI systems, the anticipated job boom is not as substantial as advertised, especially considering the extensive resources required.

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8. The Rise of Super Billionaires

Timestamp: [09:07] - [11:37]

The episode concludes with an exploration of the growing population of super billionaires—individuals whose net worth exceeds $50 billion. According to Altrada, there are only 24 such individuals globally, amassing a combined net worth surpassing $3 trillion.

Insights from Catherine Clark:

• Comparison to Average Wealth:

  • Contextualizing Wealth: A super billionaire's fortune is nearly 300,000 times that of the median American household. Elon Musk, the richest individual, holds a net worth of $419.4 billion, approximately 2.4 million times that of the average household.

• Commonalities Among Super Billionaires:

  • Predominantly from the tech sector or businesses significantly advanced by technology.
  • Notable Figures: Elon Musk, Jeff Bezos, Larry Ellison, Mark Zuckerberg, Sergey Brin, Bernard Arnault (luxury goods), and the Walton family (Walmart).

• Wealth Generation Dynamics:

  • Unlike historical billionaires who amassed wealth through tangible assets, modern super billionaires derive their wealth from intangible assets tied to future cash flows and the potential of their tech-driven enterprises.

Notable Quote:

“The value that they have is intangible. It's tied to future cash flow and future earnings and the promise of what these companies might deliver.”
– Catherine Clark [10:15]

This segment highlights the evolving nature of wealth accumulation in the contemporary economy, driven by technological innovation and the potential for exponential growth.

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9. Conclusion

Timestamp: [11:37]

Host Alex Sosale wraps up the episode by reiterating the day's key stories and acknowledging the production team. The episode underscores the complexities behind political promises, economic policies, public health challenges, corporate performances, geopolitical strategies, and the unprecedented concentration of wealth among super billionaires.

Final Note:

"We'll be back with a new show tomorrow morning. Thanks for listening."
– Alex Sosale [11:37]

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This episode of WSJ What’s News offers a comprehensive overview of pressing issues impacting the economy, politics, technology, and society. From scrutinizing the true economic benefits of AI data centers to understanding the implications of heightened aluminum tariffs and tracking the formidable rise of super billionaires, the podcast provides listeners with in-depth analysis and expert insights to navigate the complexities of the modern world.

Transcript

[Alex Sosale]

President Trump in his first Cabinet meeting defends Elon Musk's government cost cutting efforts. Plus, is the AI data center boom really creating the scores of new jobs? It's promising.

[Bob Teda]

If you think about the resources that these things consume, you really start to ask questions about whether the cost that could be incurred onto the people that live near the data center is worth it, given the relatively small number of.

[Alex Sosale]

Jobs and the rise and rise of the super billionaire. ALEX It's Wednesday, February 26th. I'm Alex Sosale for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world today. President Trump held his first cabinet meeting of his second term today. In it, he defended billionaire advisor Elon Musk, who was also in attendance. Trump Trump praised Musk's efforts to slash government spending.

[Tom Doton]

We're cutting down government, we're cutting down the size of government. We have to. We're bloated, we're sloppy. We have a lot of people that aren't doing their job. We have a lot of people that don't exist.

[Alex Sosale]

The president asked his Cabinet if anyone was dissatisfied with Musk's efforts. Members of the Cabinet seated around a long table in the West Wing laughed and none indicated any dissent. But several senior agency officials have instructed federal workers to pause or not respond to Musk's email asking federal workers for a bullet point list of five things they accomplished last week. This month, President Trump announced that duties on imported aluminum would rise to 25% from 10% starting March 12. While expanding the range of aluminum products subject to tariffs, it's driving a wedge in the $92 billion US aluminum industry. Producers are generally in favor of the expanded tariffs while buyers are against them buying. Bob Teda, who covers manufacturing and metals industries for WSJ, is here to tell us more. Bob, let's start with the producers. Why do they like these proposed tariffs?

[Tom Doton]

Producers have generally been in favor of them because tariffs create higher import prices. So it allows your domestic producers to raise their prices as well, although it's not universally supported by all producers either. The biggest aluminum company in the United States, Alcoa, has a lot of operations in Canada, and so it would be exposed to a tariff when it sends that aluminum to the United States.

[Alex Sosale]

And what about the buyers?

[Tom Doton]

Well, it's a variety of companies that make things out of aluminum. So aluminum cans, automotive parts, the automotive industry, the carmakers, they all use aluminum as well.

[Alex Sosale]

So if it's going to cost more to use foreign produced aluminum, where Are buyers going to get it? Is there enough domestic supply?

[Tom Doton]

Well, that's one of the issues, particularly on high purity aluminum that is not mixed with other metals that typically comes from a smelter. That type of aluminum is in short supply in the United States. We consume more than we make here. About 60% of the aluminum the US consumes in a year comes from imports.

[Alex Sosale]

Okay, so let's say these tariffs do go into effect. What would the impact be on the industry overall?

[Tom Doton]

It would raise profits for companies that are producers because the tariff would get kind of passed through the supply chain and of course it ends up with consumers. And that's the concern for the companies at the end of the supply chain that have a consumer facing customer that doesn't like to pay higher prices.

[Alex Sosale]

That was WSJ reporter Bob Teda. Thank you, Bob.

[Bob Teda]

Thank you.

[Alex Sosale]

A child who tested positive for measles has died in West Texas. That's according to the state health Department. The child who had not received the measles mumps and rubella or MMR vaccine is the first person to die in the outbreak that has sickened nearly 140 people in Texas and New Mexico. At least 18 people have been hospitalized and children make up the majority of those infected. The outbreak shows how quickly measles can spread in communities without high levels of vaccination. According to the state health department, most Texans testing positive for measles are unvaccinated or their vaccination status is unknown. In US Markets today, stocks struggled to shake off a four day slump and major indexes ended the day mixed. The dow dropped about 0.4%. The Nasdaq rose about a quarter of a percent and The S&P 500 was flat. And the eagerly anticipated Nvidia quarterly results came in after the bell. The chip maker said its sales rose 78% to $39.3 billion in the latest quarter while net income rose 80% to $22 billion. Both figures came in ahead of Wall Street's expectations. The company's outlook for its current quarter also exceeded expectations. The numbers show that spending on the company's artificial intelligence chips hasn't abated despite a two year boom. Coming up, are new AI data centers creating the employment bonanza that political leaders are promising? That's after the break.

[Bob Teda]

150 countries, more than a trillion dollars for dams, bridges, railways. China's building influence.

[Tom Doton]

It really is important how big your friend circle is.

[Bob Teda]

So what is Beijing getting from Belt and Road? You're going to find ways to cooperate economically that help China advance its interests. And what's the US Doing about it?

[Catherine Clark]

The Western world has come up with only partial answers.

[Bob Teda]

Check out Building Influence Sundays on the Wall Street Journal's what's News podcast.

[Alex Sosale]

To power the AI systems that Silicon Valley is hyped on, they need data centers and a whole lot more of them. Business leaders and politicians promise that getting new data centers online also means more jobs. At the press conference unveiling Stargate, President Trump said more than 100,000 new jobs would be created, quote, almost immediately. But the reality is a little more complicated. I'm joined now by Tom Doton, who covers big tech companies for the Journal. The Tom, tell to me straight, do new data centers actually create as many new jobs as leaders are promising?

[Bob Teda]

I would really argue after reporting this story out, it's just not that many jobs. One of the biggest data center projects underway right now is this thing called Stargate, which is part of a partnership between OpenAI and SoftBank and other financers. And this could ultimately be $500 billion spent on building data centers all over the country. The only one that they've built right now is this ongoing project in Abilene, Texas, in west Central Texas. It's going to be a square feet, so a huge, huge plot of land. As of right now, the projected job numbers are around 100 once this thing is built. So a million square feet, basically 100 people working there. That's the numbers right now from the Abilene Development Corporation. And an interesting comparison is around the same time in Abilene, there is a cheese packing plant being put up and it's going to have 500 jobs was what they're projecting. So at one quarter the size, having five times the number of jobs, it gives you a sense as to like the relatively small number of jobs given the huge real estate footprint these things have.

[Alex Sosale]

But it seems like there's a little bit of a disconnect between the actual process of building one of these centers and running it. Is that right?

[Catherine Clark]

Yeah.

[Bob Teda]

The process of building a data center is very labor intensive. Thousands sometimes of construction workers will be on site to prop these things up, build them, install the computers. But long term, the actual people who are full time employees once the data center is built is far smaller.

[Alex Sosale]

Usually as these data centers pop up in more rural locations, will the kinds and number of jobs being created there be meaningful for these communities?

[Bob Teda]

It depends on what meaningful means. If you're in a rural part of the country, then a data center that has 500, let's say, and that would be fairly high, like number of employees. That could be a sometimes double digit percentage increase in the number of jobs if you're in like a fairly thinly populated area. If you are in a more urban location, then no, it's not very meaningful. And if you think about the resources that these things consume, you really start to ask questions about whether the cost that could be incurred onto the people that live near the data center is worth it, given the relatively small number of jobs.

[Alex Sosale]

That was WSJ reporter Tom Doton. Thank you, Tom.

[Bob Teda]

Thanks for having me.

[Alex Sosale]

Belonging to the billionaires club is no longer the status symbol that it used to be. Now there's an even higher category of ultra rich, the super billionaire. Those are people worth $50 billion or more. And according to global intelligence firm Altrada, there are just 24 of them worldwide. As of early February, their combined net worth totaled more than $3 trillion, equivalent to the nominal GDP of France. Reporter Catherine Clark covers residential real estate for the Wall street journal. So Catherine, $50 billion to me is simply an unfathomable amount of money. Give us a little bit of context for that. How much is that versus the average American household?

[Catherine Clark]

To put that in context, that's almost 300,000 times the median net worth of the average American household. And if you look at the net worth of the richest person in the world, according to Altrada's data, that's Elon Musk, and he's worth $419.4 billion, which is about 2.4 million times the net worth of the average American household.

[Alex Sosale]

So you mentioned Elon Musk, but who are some of these other super billionaires and like, what do they have in common?

[Catherine Clark]

The main commonality we see between them is that they often work in the tech space or they work in businesses that have been propelled to new levels by technology. So we're talking a lot of names that you would recognize. We're talking Elon Musk, Jeff Bezos, Larry Ellison, Mark Zuckerberg, Sergey Brin. And then there are a few that are not in the tech space, like Bernard Arnault, the head of luxury goods firm lvmh. And we're talking about the Walton family who are behind the Walmart empire.

[Alex Sosale]

So you write that this level of wealth is pretty different from even just a decade ago.

[Catherine Clark]

What's changed over the past few decades? We've seen the rise of these sort of major tech companies and their founders whose wealth is tied so intrinsically to the value of those companies. Back in the day, when we looked at the wealth of people like the Vanderbilts or the Rockefellers. We're talking about actual physical assets, things that you could actually take stock of and put a value on. With this new set of billionaires, the value that they have is intangible. It's tied to future cash flow and future earnings and the promise of what these companies might deliver. And so the numbers that we're talking about are sort of pie in the sky to some degree.

[Alex Sosale]

That was WSJ reporter Catherine Clark. Catherine, thank you so much.

[Catherine Clark]

Thank you for having me.

[Alex Sosale]

And that's what's news for this Wednesday afternoon. Today's show was produced by Pierre Bienname and Anthony Banci, with supervising producer Michael Kosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.