Data Centers – emerging trends How to benefit
The Data Centers industry in 2024 is experiencing significant growth and transformation.?Trends such as artificial intelligence (AI), edge computing, and hyperscale data centers are major driving forces behind the industry’s growth. According to Statista, the data center market is expected to grow at a rate of 6.56% annually between 2024 and 2028, resulting in a market volume of $438.70 billion by 2028. We share our insights into industry players and how investors can benefit from emerging industry trends.
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Key trends behind Data Centers Industry growth
Technological advancements driven by Artificial Intelligence:
The demand for data centers is fueled by the rapid rise of artificial intelligence (AI). AI applications, particularly deep learning models, require substantial computational power for training and execution. Data centers provide the necessary infrastructure to handle these intensive workloads. AI systems often need to process data in real-time, which necessitates low-latency solutions. Data centers facilitate this by optimizing network traffic and ensuring minimal latency.
Data centers utilize AI to predict and manage fluctuating demands, allocating computing and storage resources efficiently. This not only improves performance but also enhances energy efficiency and operational reliability.
Server Virtualization: Continues to shape software-defined data centers (SDDCs), allowing multiple server operating systems to run on a single physical host. The key feature of server virtualization is that it enables more than one server operating system to run as a guest on a given physical server host. The benefit of this is that it allows organizations to optimize their use of computing resources. In particular, it allows organizations to implement redundancy without purchasing additional hardware.
Edge computing: Edge computing leverages devices at the network edge to process data. These devices may process all local data or may work in tandem with a cloud. The main benefit of edge computing is that it can significantly reduce processing times. This vastly increases the potential functionality of Internet of Things (smart) devices. If edge computing is used as an alternative to a public cloud, it may also reduce processing costs.?
Hybrid cloud: For some organizations, the public cloud is the obvious solution. For other organizations, the private cloud is the obvious solution. For many organizations, however, both public clouds and private clouds offer meaningful and distinct benefits. It therefore makes sense to harness them together as much as possible. In particular, 2024 will see the growth of high-performance multi-cloud architecture.
As AI applications grow, the need for scalable infrastructure becomes critical. Data centers provide this scalability, enabling seamless expansion to meet increasing data and processing demands.
Large companies are already investing heavily in new data center developments. For instance, Meta announced the construction of a new $800 million data center campus in Montgomery, Alabama.
Cloud vs. AI Bandwidth:
While AI dominates the spotlight, cloud services providers (CSPs) continue to drive demand for data center capacity.?As large enterprises adopt AI and other digital tools, the lines between cloud and AI are blurring. Cloud computing is significantly impacting the demand for data centers from 2024 to 2027. I&O teams are revisiting existing cloud deployments to make them more efficient, resilient, and cost-effective. By eliminating redundancy, optimizing costs, and modernizing infrastructure, they aim to improve cloud delivery.?Gartner predicts that 65% of application workloads will be ready for cloud delivery by 2027.
New Application Architectures: As new application architectures emerge, I&O teams face demands for specialized infrastructure. This includes edge infrastructure for data-intensive use cases, non-x86 architectures, serverless edge setups, and 5G mobile services.?Containerization is also on the rise, with 15% of on-premises production workloads expected to run in containers by 2026.
Cloud Principles for Data Centers: On-premises data centers are adopting cloud principles. By managing infrastructure from a cloud-based control plane, organizations can achieve service-centricity and economic models similar to the cloud.?Gartner predicts that 35% of data center infrastructure will be managed this way by 2027.
International Expansion:
Data center expansion is ramping up globally.?Companies are establishing facilities in various regions to meet growing demand and improve latency for users.
Global Digital Economy: The ever-growing digital economy necessitates data centers across different regions.?As businesses expand globally, they require local data infrastructure to serve users efficiently.
AI and Machine Learning: The democratization of AI and machine learning drives demand for data centers.?These technologies require robust infrastructure to process vast amounts of data, leading to international data center expansion.
Regional Power Limitations: Scarcity of data center colocation supply arises due to regional power constraints.?As power requirements grow exponentially, data centers compete with other high-power users like electric vehicle infrastructure and advanced manufacturing.
Renewable Energy Targets: Governments and operators scramble to secure sustainable energy sources.?AI-driven extreme-scale developments demand substantial power (300 megawatts to over 500 megawatts), pushing innovation in power sourcing.
Companies that operate the largest global Data Centers
As of 2024, several companies operate some of the largest data centers globally. Below we highlight some of them:
China Telecom-Inner Mongolia Information Park (Hohhot, China): This colossal complex spans 10.7 million square feet and includes contact centers, warehouses, offices, housing quarters, and cloud computing data centers.?China Telecom Corporation Limited runs it, providing vital infrastructure to various sectors.
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The Citadel – Switch Legacy (Tahoe Reno, Nevada, USA): Located in Reno, Nevada, this data center boasts a 650-megawatt power capacity and up to 7.2 million square feet of coverage. It operates fully on renewable energy and exceeds industry norms in security and reliability.?Switch serves a diverse range of businesses.
Yotta NM1 (Panvel, India): Part of the Integrated Yotta Data Center Park near Navi Mumbai, Yotta NM1 is India’s only multi-tenant Tier IV data center.?It accommodates up to 30,000 racks and 250 MW of electricity, emphasizing energy sustainability, dependability, and security.
Amazon Web Services (AWS): AWS, a subsidiary of Amazon, is the largest cloud service provider and data center operator worldwide. It boasts 32 cloud regions and 102 availability zones, with plans to expand further.
Google Cloud Platform Loudoun County Hyperscale Zone (Virginia, USA): Google’s data center in Loudoun County, Virginia, is part of its extensive global infrastructure.?It plays a crucial role in delivering cloud services to users worldwide.
Microsoft Azure: Microsoft’s Azure platform is another major player in the hyperscale data center market, providing extensive cloud services and infrastructure.
Equinix: Equinix is one of the largest data center real estate companies, operating numerous facilities worldwide and serving a wide range of industries. Equinix operates 85 data centers across Europe.
Meta Platforms: Meta operates extensive data centers to support its vast social media and virtual reality platforms.
Digital Realty: Digital Realty owns one of the most extensive data center footprints globally, with over 300 facilities across 25 countries.
Oracle Cloud: Oracle is also a significant player in the data center market, particularly in the enterprise and cloud services sectors.
Companies which will benefit from the growing demand for Data Centers
In addition to the above mentioned enterprises, we would like to highlight companies-beneficiaries of the growing demand for data centers:
Nvidia: As a leading provider of AI hardware and software solutions, Nvidia stands to gain from the expanded infrastructure required to support AI workloads in data centers.
Cisco: Cisco’s networking solutions are integral to data center operations, making it a key beneficiary of the growing market. Cisco provides a range of data center infrastructure solutions, including servers and storage systems. The company’s Unified Computing System (UCS) integrates computing, networking, and storage resources, offering a streamlined and efficient solution for data centers looking to optimize their infrastructure. By leveraging its comprehensive portfolio of products and solutions, Cisco is well-positioned to capitalize on the growing demand for data centers and support the evolving needs of data center operators from 2024 to 2027.
Accenture: Accenture leverages its expertise in digital transformation and technology consulting to help clients optimize their data center operations. This includes integrating advanced technologies such as AI and cloud computing, which are driving the increased demand for data centers.
Dell Technologies: Dell is another hardware giant investing in data center infrastructure. Dell Technologies is a leading provider of servers and storage systems, which are essential components of data center infrastructure. As data centers expand to meet increasing demand, Dell’s PowerEdge servers and Dell EMC storage solutions will be critical in providing the necessary computing power and storage capacity.
Advance Micro Devices: As a chipmaker, AMD plays a crucial role in data center innovation, especially with the rise of artificial intelligence and generative AI technology. AMD’s core business includes the production of high-performance processors and GPUs. Data centers require powerful CPUs and GPUs to handle large-scale data processing, AI workloads, and complex computations. AMD’s EPYC processors and Radeon Instinct GPUs are well-suited for these tasks, making them attractive options for data center operators. AMD often offers competitive pricing compared to its rivals while maintaining high performance and efficiency. This cost-effectiveness is particularly appealing to data center operators looking to maximize their return on investment.
Telehouse: Based in Europe, Telehouse provides carrier-neutral colocation services and has 45 data centers spanning over 560,000 square meters with approximately 900 MVA of power capacity. Telehouse’s data centers are strategically located in major European cities such as London, Paris, and Frankfurt. These locations are critical hubs for internet traffic and business operations, making them attractive to companies looking for low-latency and high-connectivity data center services. As more businesses move their IT infrastructure off-premises, the demand for colocation services will grow. Telehouse can capitalize on this trend by offering secure, reliable, and scalable colocation solutions that allow businesses to house their servers and networking equipment in Telehouse’s state-of-the-art facilities.
Industries which will benefit from demand for Data Centers
The growing demand for data centers from 2024 to 2027 is expected to benefit several key industries significantly:
Technology and Cloud Services: Companies providing cloud services, such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud, will see increased demand as more businesses migrate their operations to the cloud. The rise of AI applications also drives substantial data processing and storage needs.
Real Estate and Construction: As new data centers are built to meet the growing demand, the real estate and construction sectors will benefit from increased investment in infrastructure development. This includes both new construction and retrofitting existing structures to accommodate data center needs.
Renewable Energy and Utilities: Data centers are significant consumers of power, and their expansion will drive demand in the energy sector. Companies involved in renewable energy will benefit as data centers increasingly seek sustainable energy sources to power their operations.
Telecommunications: The telecommunications industry will see increased demand for high-speed internet and connectivity solutions, as data centers require robust network infrastructure to handle large volumes of data traffic.
Hardware and Semiconductor Manufacturers: Companies that produce hardware components, such as servers, storage devices, and networking equipment, will benefit from the need to equip new data centers and upgrade existing ones. The semiconductor industry, in particular, will see growth due to the rising demand for advanced chips used in data processing and AI applications.
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