# The end of zero marginal cost

**Published by:** [Brandon Donnelly](https://brandondonnelly.com/)
**Published on:** 2026-05-21
**Categories:** data-centres, tech, real-estate, land-use, development, dror-poleg
**URL:** https://brandondonnelly.com/the-end-of-zero-marginal-cost

## Content

The conventional beauty of the internet and software was that it had effectively zero marginal cost. That is to say, it might cost you a lot of money to create something initially, but once created, you could scale it very quickly, more or less for free. This has been a great way to make money, and it's the opposite of something like real estate development where everything takes forever and costs too much money. But the landscape has shifted rapidly. Dror Poleg wrote this week that intelligence, rather than software, is now eating the world. The fundamental difference is that while software had zero marginal cost, AI does not. When we ask AI something, it has to reason it out in real time, and in order to do that, it needs to consume lots of energy and compute. That changes things:As a result of the above, we are seeing something we’ve never seen before: Software demand is beginning to bump into physical constraints. The world is struggling to allocate sufficient land to build data centers and to produce and redirect the energy required to meet AI demand. Tech giants like Google, Amazon, Meta, and Microsoft are spending an unprecedented amount of money to build these new data centers, but they are approaching their financial limits. Google has recently partnered with Blackstone, one of the world’s largest landlords, to expand and expedite the construction of new data centers.All this sounds like great news for real estate developers. Finally, order has been restored in the universe: If you want to grow your business, you need to pay more rent; the natural scarcity of land is asserting itself. Instead of software eating the world, it is now the world that is eating the free cash flow generated by software companies.However, these specific dynamics may only remain true in the short to medium term. As dystopian as it may seem, there is indeed an organized and real effort to bring data centres into space. Some of the advantages of this include abundant, continuous energy and zero land-use constraints to fetter growth. Now, I don't know enough to comment on the feasibility or timing, but it certainly sounds like great fodder for a Black Mirror episode.Cover photo by SpaceX on Unsplash

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