Artificial intelligence chipmaking giant Nvidia has finalized the purchase of a fourth building that's part of an office park it agreed to buy last year across the street from the tech company’s spaceship-like offices in Santa Clara.
The firm struck a deal last December to buy four buildings on San Tomas Expressway plus a parking garage from a real estate firm, The Sobrato Organization, that pioneered the development of tech office campuses across Silicon Valley, including Apple’s first campus in Cupertino. The 125,000-square-foot buildings at 2711, 2721 and 2731 San Tomas Expressway changed hands this spring for $84.7 million apiece. A fourth formerly Sobrato-owned building at 2701 San Tomas Expressway, also occupied by Nvidia, has now sold as well for the same price, according to public records.
The firm purchased its longtime headquarters on the same stretch last spring for a record $374.3 million for seven properties totaling roughly 626,200 square feet.
Nvidia has spent close to $1 billion since last year on acquiring properties near its headquarters to support its role in the fast-growing AI industry.
In May, the company forked over $123 million in cash for a 10-building office and research park at 2348 and 2350 Walsh Ave., a collection of low-slung buildings across the street from Nvidia’s headquarters at 2788 and 2888 San Tomas Expressway. The park contains 10 buildings totaling just over 250,000 square feet, according to a marketing brochure. They last changed hands as part of a large portfolio of properties purchased by Blackstone in 2022.
Bigger and bigger?
In its most recent earnings call last month, the company said it expects the AI boom to keep gaining steam in coming years, estimating that global AI infrastructure spending on real estate and other support systems will total as much as $4 trillion by the end of the decade.
Nvidia CEO Jensen Huang said during the call that data center capital spending from the company's tech giant customers including Microsoft and Amazon will probably hit $600 billion this year. But with Nvidia posting slower growth in the most recent quarter, analysts have speculated in recent days that the company's breakneck growth of the last few years may be slowing, especially in light of supply chain challenges that can’t be solved simply by throwing cash at them.
The second quarter marked Nvidia’s slowest growth since 2023, when the generative AI boom began driving the company's results. The slower growth comes as challenges to AI real estate development gain more attention, including finding the power and water needed to support the data centers used to house the computer technology.
Nvidia also faces growing competition from chipmakers including Advanced Micro Devices Inc., while big technology firms including Apple, Amazon and Microsoft are ramping up their own chip manufacturing to stay ahead of AI demand.
The office market continues to show signs of a recovery in 2025. An upturn in tenant demand resulted in the highest leasing volume since 2022 in the San Jose office market during the most recent quarter. However, a string of tenant downsizings over the past year had a negative impact on absorption, pushing the vacancy rate back up, to 16.3%.
The excitement and optimism in the San Francisco Bay Area around the AI boom notwithstanding, some experts caution that there's no certainty the industry will return the region’s office market to its pre-COVID-19 glory days.
While AI companies are a leading source of new office space demand, the adoption of AI throughout the wider economy may weaken office demand by reducing head counts, according to a recent San Jose market report by CoStar.