A $25 billion data center is slated for this tiny Arizona community

Article originally posted on AZ Central on May 30, 2025

A $25 billion data center development is slated for 2,100 acres in Tonopah, following a Phoenix investment group’s purchase of the land.

Arizona Land Consulting, led by Anita Verma-Lallian, paired with venture capitalist Chamath Palihapitiya, CEO of Social Capital, to buy the site in a $51 million deal. The deal is the first real estate investment for Palihapitiya, Verma-Lallian said.

“He has a lot of tech experience, he’s never invested in real estate, so with my background in real estate it made sense to work together,” she said.

The widespread adoption of artificial intelligence has driven demand for large scale data center development.

“Investing in AI infrastructure is not only critical to solving our economic challenges, it is a matter of national security,” Palihapitiya said in a statement. “This project can accommodate over 1 gigawatt and is ideally situated for us to continue to support America’s lead in AI.”

The Phoenix area’s total data center capacity online now is about 804 megawatts, meaning the new development could bring more data capacity than the region currently has. AI and its high data demands have led to greater need for high-capacity data centers. One gigawatt of power is enough to power a small city, or more than 200,000 homes.

Smita Mehta, founder of Equity Land Group Holdings and business partner to Verma-Lallian, called the site the “last remaining mega-site in the West Valley,” and said the purchase of the land was a “rare and valuable opportunity” for the group.

The site is on unincorporated land in Maricopa County, so the county’s Board of Supervisors will be charged with voting on the future rezoning of the site to allow the project.

Verma-Lallian said she will oversee the entitlement process for the site, including zoning and permitting, as well as development. Her group could choose to remain as an owner once the project is built.

She and her group are already in discussions with potential users, she said, and would like to have some commitments from businesses to use the data storage before it completes construction. It could likely be about two years before vertical construction would begin, she said.

Some leaders cautious about data centers, despite demand

In her State of the City address, Phoenix Mayor Kate Gallego called on state leaders to roll back incentives for data centers, due to the amount of energy they consume and comparatively few long-term jobs created.

In her speech, Gallego said data centers serve a purpose, but “they also pose risks and take up so much energy that it threatens the future of other kinds of businesses. They produce a lot of heat and noise but only bring a few long-term jobs.”

Gallego said tax breaks for such developments are no longer necessary, based on the explosive growth of data centers in the Valley. Phoenix has also introduced a general plan amendment that would move future data center developments away from areas where mixed-use, walkable neighborhoods are envisioned.

“One major concern with data centers is that their energy demand is expected to increase significantly, in large part due to artificial intelligence,” city staff wrote in the plan amendment proposal. “Another major concern is the scale at which these types of facilities are built and how they can negatively affect the surrounding community they are built in.”

Data centers in the past have been criticized as heavy water users in addition to power, but changing cooling technology has allowed new data centers to consume significantly less water, with many data center companies opting for waterless cooling systems.

“Building sustainably is important to all of us,” Verma-Lallian said. “Energy-efficient and water-efficient development will be a priority.”

But despite the wariness over new data center development from some leaders, national studies show Phoenix has pent-up demand for more space.

Nationally, the Phoenix area ranked seventh for data center inventory that is already functional, with 804 megawatts already online, according to the North America Data Center Report from real estate firm JLL.

Another 1,004 megawatts are under construction in the Valley, and 3,684 megawatts are planned, according to the report.

Northern Virginia led the nation with 4,934 megawatts of data storage online.

For Phoenix, data center vacancy was extremely low, with only about 2% of available wattage vacant, driving the need for more data storage space.

“The metro Phoenix data center absorption rate is down significantly, because we have no supply available,” Mark Bauer, executive managing director for JLL, said in a statement. “Current construction will help alleviate the pressure generated by our 2% vacancy rate, and planned construction will go the next step, more than tripling our current local data center inventory. Even if a significant portion of the space under construction is preleased, it creates critical new options and opportunity.”

Far West Valley proposed for futuristic development

The site is near Belmont, where a group that includes Microsoft founder Bill Gates has floated plans for a “smart city” driven by technology.

“It makes sense to have data centers near where the data is needed,” Verma-Lallian said.

For now, there is little development around the 2,100-acre site, she said, adding that the Tonopah site makes sense for data center development, because there is not existing development around it, and it would not disturb established neighborhoods.