AI and cloud adoption propelling data centre demand

AI and cloud adoption propelling data centre demand

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Artificial intelligence (AI) and continued cloud adoption are the main drivers of hyperscale expansion, driving record growth in the data centre sector according to the JLL’s new 1H 2023 North American Data Center Report.

According to the report, the data centre will serve as the “backbone to support its explosive growth at a massive scale”.

The first half of 2023 finished with record absorption of as hyperscalers, financial firms, healthcare companies and other major firms raced to secure data centre space.

Most of that supply that will be delivered in the later parts of this year has already been prerelease or is under exclusivity.

Due to primary market power constraints, supply coming online in 2024 will also be prereleased, resulting in limited options for users who are not in the market far in advance of their preferred go-live data.

“The data centre industry is continuing to experience explosive growth in demand which is leading to completely sold-out primary markets, secondary market expansion and the development of newer tertiary markets,” said Andy Cvengros, managing director, JLL.

“Major markets and most secondary markets have reached a state of supply and demand imbalance; the development timeline for new data centres has grown to three to five years – or more in some cases.

“If you want a new data centre within that timeframe, start planning for it now, as we don’t see any sign of this demand slowing or the power situation getting any better.”

When it comes to primary data centre markets, Phoenix and the Northwest have outpaced Northern Virginia as the leader in absorption with 194.5MW and 185.9MW for the first half of 2023. Primary markets already have a limited inventory of colocation space, leading data centre operators to increase pricing by up to 20 to 30%.

AI is expected to accelerate the demand as more industries adopt the technology to achieve corporate objectives.

The last three years have seen massive investments in AI and machine learning through venture capital, private equity and M&A. So far, 2023 has seen $32 billion in investments through Q1.

Additionally, the demand for edge computing is accelerating. Generative AI, like ChatGPT, is also driving demand for edge computing requirements, as cloud companies are leveraging edge to enhance scale and deliver AI applications for faster, better responses.

AI models are also changing data centre infrastructure, with some large requirements driving densities to 50-100 kW per rack.

Many colocation providers have adjusted the voltage delivered to the floor to 415 volts, which can reduce the upfront cost of delivering power to these high-density clusters.

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