The data center industry is being transformed by the sheer volume of data storage demand and, more critically, by the growing complexity of storage requirements, accessibility and security of the data
Anticipated annual growth rate of 10% (2024 - 2030) will probably be exceeded by a wide margin - and the high bar set by the Internet leaders, eager to cash in on explosive demand and determined to maintain their dominance in artificial intelligence, upends established digital real estate players (REITs)
To gain a competitive edge, data solutions are fine-tuned - wide-ranging applications are implemented by a growing posse of industries, and technical specifications on the hardware - as well as on the software - are fragmenting the data centers' ability to respond
With the growth of artificial intelligence, and the impact of predictive algorithms on industries from healthcare to finance to manufacturing and entertainment, new chips and server technologies with extreme rack power densities are drawing lines between data centers of the ‘old school’ and of ‘new design’
The map of tomorrow's data tech has emerged
The challenge of managing surging electrical power
While data demand has been strong over the time frame covered by Cisco’s 2020 Internet Report (2018-2023) – driven mainly by server-to-server (M2M or machine to machine) data generation - energy consumption by the centers had remained flat (2015-2020 – Goldman Sachs)
This apparent contradiction between increasing storage capability and stable energy consumption is explained by very large gains in server (and chip) power efficiency – dividing data center power demand in the US by a factor of 10 in the past five years – from 850 TWh in 2017 to approx. 85TWh in 2022 (source Goldman Sachs)
That was then – until approx. 2022 – as growing data demand was met by increasing power efficiency
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This is now - as new improvements in power efficiency are limited, even improbable
From approx. 4% of US electricity demand in 2022, data centers are expected to account for 6% by 2026 (sce : IEA) and 8% of total consumption by 2030 (sce : Goldman Sachs) - making data centers the key driver in the American power market
Unsurprisingly, access to renewable energy sources - and to nuclear energy - are on a fast track to become key differentiating factors as transmission services and connectors are expected to struggle to meet surging demand
Hyperscale, Internet giants come calling
Experiencing a generational shift with infinitely more powerful chips, many more racks lodged in larger data centers – ‘hyperscale’ data centers support extreme scalability and large-scale workloads operating over an optimized network infrastructure, insuring minimized latency (response time)
The name of the new game for a single 'new generation' data center : 5 000 servers - 10 000 square feet (920 m²) and 40GigaBytes per second network connections
Powered by CPUs and GPUs, classed as Very Large Scale Integration circuits (VLSI) – collections of transistors and resistors, all microscopic electronic components running into the billions – their tasks intensify electricity flows
As transistors, numbered in the billions, became so tiny, the flows ‘leak’ electrons and the energy dissipated due to chip resistance is transferred to the material – making every operating processor extremely hot with a very significant cumulative effect
Out of a worldwide total of data centers (approx. 11 000), hyperscale centers have surpassed 1 000 installations in early 2024, according to Synergy Research, with 51% located in the US, 17% in Europe and 16% in China, by worldwide capacity (measured by MW of critical IT load)
Having doubled over the past 4 years, the number of hyperscale centers is expected to double again by 2028 (totaling 2 000 centers)
What is more, those data centers still to be built will accelerate capacity growth further by operating on even larger scale, pushed by generative AI technology
As discussed in follow-up themes and accompanying notes, data storage's many providers will continue to cater to a familiar - and growing - client base seeking co-location (renting space in data centers) and specialized software extensions, as machine-to-machine data generation is fully embraced in SaaS, IaaS, PaaS, search, social networking, e-commerce and gaming
However, in a virtuous circle, Amazon, Microsoft and Google will cement their leading positions as cloud providers – with the broadest data center footprint and optimized cross-connectivity to deliver access, speed and efficiency
Accounting for 60% of all hyperscale data center capacity, these three firms have the financial capacity and the drive to keep up with demand - in the name of securing their position at the head of the table
The map of tomorrow's data tech has emerged
Amazon, Microsoft and Google dominate from the pinnacles of ever more powerful hyper-scaled centers
Meta/Facebook, Alibaba, Tencent, Apple and TikTok's ByteDance remain significant partners in the aristocracy of data management
Everybody else will play second-fiddle - and these data centers, less sizable but indispensable, are deployed in the grid to push infrastructure nearer to customers
Infrastructure demand unleashed by projected data center growth has been benefiting a long tail of suppliers - both in hardware and in software
The linked themes of this series will attempt to present some of the essential companies in the supply chain
- Data Centers - Infrastructure Challenges
- Cloud - Data Architecture Applications
- Data - Exponential Demand Growth