How Will The Data Center Ecosystem Be Impacted By AI?

AI-driven investments are transforming the data center ecosystem, projecting over $1 trillion in spending to enhance infrastructure and connectivity.

 

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Data centers are set for an artificial intelligence (AI) boost that could see investments surge past $1 trillion dollars over the next several years, with that investment also spilling over into the connectivity tissue linking those locations.

Dell’Oro Group predicts data center capex will surge to a 24% compound annual growth rate (CAGR) by 2028 due to “surging demand in AI-related data center infrastructure.” This could result in a 13-figure market over the next several years.

“AI has the potential to generate more than a trillion dollars in AI-related infrastructure spending in cloud and enterprise data centers over the next five years,” Baron Fung, senior research director at Dell’Oro Group, wrote. “AI infrastructure, which includes servers with GPU or custom accelerators, along with dedicated networking, storage, and facilities, are highly capital-intensive. While the industry continues to assess the potential return on AI-related investments, major efforts have been underway in the ecosystem in achieving long-term sustainable capex growth.”

The research firm noted that U.S.-based hyperscalers like Amazon, Google, Meta, and Microsoft will drive much of this investment, with just those four firms accounting for half of global data center capex as early as 2026.

Those hyperscalers have increasingly hinted at this need to increase their AI-connected investments.

“We are – and we’ve talked about now for quite a few quarters – we are constrained on AI capacity,” Microsoft CFO Amy Hood said during Microsoft’s latest earnings call. “And because of that … we’ve … signed up with third parties to help us as we are behind with some leases on AI capacity. We’ve done that with partners who are happy to help us extend the Azure platform, to be able to serve this Azure AI demand. And you do see us investing quite a bit as we’ve talked about in builds so that we can get back in a more balanced place.”[…]

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