The data center physical infrastructure (DCPI) sector enjoyed double-digit growth in 2023, as the industry overcame longstanding, pandemic-induced supply chain constraints and started to realize the benefits of the AI boom.
According to Dell’Oro Group’s latest Data Center Physical Infrastructure report, the sector achieved 16% revenue growth year-over-year – despite a deceleration in data center physical infrastructure revenue growth starting in the fourth quarter of last year.
Fulfilled Orders
Over recent months, the AI boom has been impossible to miss. According to Gartner, 70% of executive leaders said their organization is in “investigation and exploration mode with generative AI”.
Interestingly, however, while many would assume the rapid growth seen by the data center physical infrastructure market was being fueled by the explosion of generative AI, Dell’Oro research director Lucas Beran said the uptick was “primarily the result of vendors fulfilling pandemic-induced backlogs” that were delayed by supply chain constraints.
Beran noted that although the DCPI growth in 2023 included a “marginal contribution” from sales linked to AI workloads, the true impact of the sector is yet to be seen.
“This is because building new data center facilities generally takes 18-24 months, and new purpose-built facilities to support AI workloads are expected to start materializing in the second half of 2024,” he said.
Surging Demand
In February, Andy Cvengros, managing director of data center markets at JLL, noted that secondary markets are gaining ground as demand for data centers soars in North America.
The analyst said the search for more power and more land is forcing data center users to plan further ahead in their IT strategy to consider new regions and “commit to space and power on accelerated timelines to find capacity to fit their requirements.”
However, finding that capacity may be the biggest challenge to future growth.
In a recent webinar hosted by Data Center Knowledge, the issue of power capacity for data centers was a focus for Christopher McLean, principal at Critical Facility Group. He noted that seismic growth due to AI means the industry will need to adopt an all-of-the-above strategy to meet unprecedented power demands.
This growth has already caught the energy sector off guard, as Jason Shaw, chairman of the Georgia Public Service Commission, told the Washington Post. “It makes you scratch your head and wonder how we ended up in this situation. How were the projections that far off? This has created a challenge like we have never seen before.”
Thirst For Data
The data center capacity challenge isn’t limited to power. Generative AI is thirsty, as highlighted in a recent paper from a team of researchers at the University of California, Riverside.
Led by Dr Shaolei Ren, it was estimated that “ChatGPT needs to “drink” a 500ml bottle of water for a simple conversation of roughly 20-50 questions and answers.
Training ChatGPT for those questions and answers added up to gulping 6% of the water in the West Des Moines water district. Ren’s team estimated that in 2022 data centers used “1.5 billion cubic meters of water withdrawal in the US, accounting for about 0.33% of the total US annual water withdrawal,” or roughly double the water withdrawal of the country of Denmark. They suspect that data centers' water consumption will double again by 2027.
New Deployments
Yet, many are seeking ways to mitigate power and water demands, such as the Department of Energy’s COOLERCHIPS initiative, Microsoft’s investment into nuclear fusion, or Google’s adjusting its power usage at peak times.
“Evidence indicates that these deployments are nearing,” Dell’Oro Group’s Beren said. “Vertiv, the market share leader in data center thermal management, secured its first quarter of notable liquid cooling deployments… This is only the beginning, as Vertiv plans to increase liquid cooling manufacturing capacity by 45 times in 2024.”
According to the Dell’Oro Group’s forecasts, the 2024 worldwide DCPI market growth will start “moderate in the first half of 2024 but accelerate through the second half of the year as physical infrastructure deployments related to AI workloads increase.”
Also, in Dell’Oro Group’s 4Q 2023 report, the DCPI market grew by double digits in North America, Asia Pacific (excluding China), Europe, and the Middle East and Africa (EMEA) paced market growth in 4Q 2023, while the Caribbean and Latin American (CALA) revenues grew at a much lower rate. China was the only market region to decline.
