AI Data Center Market Size, Share & Industry Analysis, By Component (Hardware, Software, and Services), By Data Center Type (Hyperscale Data Center, Colocation Data Center, Edge Data Center, and Others), By Industry (Healthcare, Retail, IT and Telecom, BFSI, Automotive, Media & Entertainment, Manufacturing, and Others), and Regional Forecast, 2024 – 2032

The global AI data center market size was valued at USD 12.95 billion in 2023. The market is projected to grow from USD 15.13 billion in 2024 to USD 94.03 billion by 2032, exhibiting a CAGR of 25.7% during the forecast period.

AI (Artificial Intelligence) data center is a facility designed to cope with the enormous power, storage, and cooling requirements of AI technology. In our scope, we have considered various types of data centers, including hyperscale data centers, colocation data centers, and edge data centers that are investing in implementing AI-related infrastructure. The report has analyzed key players that offer specialized hardware, software, and integrated solutions specifically developed to handle the demanding AI workloads. In addition, the report provides opportunities that are available to key AI infrastructure providers.

In the coming years, the market is expected to exhibit a significant focus on the optimization of data center infrastructure with AI for enhanced performance, energy efficiencies, and scalability. In addition, as AI-based environmental concerns grow, data centers are increasingly integrating AI to optimize energy consumption and reduce their carbon footprint. The key market trends include AI-driven innovation, edge AI expansion, and the adoption of hybrid cloud environments.

The COVID-19 pandemic significantly boosted the adoption of AI technologies and digital transformation, positively influencing the AI data center market. This boost led to a higher need for data centers equipped with AI expertise to manage growing workloads. However, supply chain disruptions temporarily slowed the market growth. Despite these hurdles, the pandemic highlighted the importance of AI-based data centers in supporting critical infrastructure driving long-term growth and innovation in the sector.

AI DATA CENTER MARKET TRENDS

Hybrid and Multi-Cloud Deployments to Propel Market Growth

Several businesses are using hybrid and multi-cloud strategies, combining on-premise data centers with public cloud services. As AI models evolve, the need for varying computing, storage, and networking requirements grows. Hybrid and multi-cloud setups offer dynamic environments to meet these demands. In addition, AI generates and processes large volumes of data. Hybrid and multi-cloud solutions allow businesses to manage this data efficiently across different environments.

• As per industry experts, a survey reported that a significant percentage of firms (76%) have been using two or more public clouds, with the average having 2.3 clouds in use. It was observed that large enterprises showcased even higher percentages of multi-cloud use. The revenue figures were more than USD 1 billion in revenue, which is twice as likely to be using three or more clouds as smaller companies.


• As per a global survey by industry experts, over 86% of businesses have adopted a multi-cloud strategy owing to shifting business priorities. (Survey participants: 727 cloud technology decision-makers at businesses with more than 1,000 employees)

Thus, with businesses shifting toward hybrid and multi-cloud strategies, there is a growing need for hybrid and multi-cloud solutions in AI-based data centers due to their flexibility, scalability, and cost-effectiveness in handling vast amounts of data for AI workloads.

MARKET DYNAMICS

Market Drivers

Rising Demand for AI-powered Applications and Growth in Cloud Computing to Drive Market 

In recent years, there has been a surge in the use of cutting-edge AI technologies such as deep learning, advanced machine learning, and automated language processing across several sectors. These technologies are applied in various industries, including financial analysis, medical research, and smart production, among others. These applications often require immediate data processing and sophisticated computations, which necessitate high-performance data centers designed for such workloads. This growing need for AI-specific data centers equipped with advanced hardware and software helps businesses manage large datasets and execute complex algorithms.

• As per a recent article published by Acropolium, over 42% of businesses that were surveyed reported AI integration into their operations. In addition, out of the early adopters, 59% of businesses have plans to speed up and expand their investments in AI technology.

Moreover, as companies shift toward cloud-based solutions, the demand for high-performance data centers capable of processing large amounts of information continues to grow.

• As per Edge Delta Insights (2024), around 90% of businesses around the world already use cloud services—such as Google, Microsoft, and AWS. The insights also indicated that the number of cloud computing users is expected to grow exponentially over the coming years.

Thus, the rising demand for AI-powered applications and growth in cloud computing are driving the market in recent years.

Market Restraints

High Implementation Costs and Maintenance Associated with AI Data Centers May Hinder Market Growth

One of the significant challenges slowing the growth of the AI-based data center industry is the high costs involved in setting them up and keeping them running efficiently.

These data centers require specialized hardware and consume much power to maintain peak performance. Integrating AI systems into existing infrastructures is also a complex task, particularly for companies that may not have the technical expertise or financial resources to manage such upgrades.

Data security is another issue slowing the market’s growth. As AI systems handle sensitive information, concerns about privacy breaches and adherence to strict regulations such as GDPR can make businesses hesitant to adopt these technologies. Additionally, running AI workloads requires experts with niche skills, and the current shortage of qualified professionals is a limiting factor.

The high costs of implementation and maintenance associated with AI-based data centers, the need for robust data privacy and security measures, and the shortage of skilled professionals may hamper AI data center market growth.

Market Opportunities

Increasing Demand for Hyperscale Data Center Services Creates Lucrative Opportunities for Market Players

Hyperscale data centers are becoming increasingly prevalent due to their significant role in supporting AI-driven use cases. These types of data centers are in demand due to the increasing need for processing power. AI technologies need immense computing power. Hyperscale data centers, along with their massive infrastructure and advanced technology, are perfectly positioned to meet this need.

With the increasing demand for AI, the demand for these data centers grows. In addition, cost-effectiveness, scalability, and flexibility are the biggest advantages of hyperscale data centers. These features make such data centers attractive to companies looking to invest in AI while keeping their costs in check.

Thus, the increasing demand for hyper-scale data center services creates lucrative opportunities for market players, further accelerating market growth over the coming years.

SEGMENTATION ANALYSIS

By Component

Hardware Component Dominates Owing to its Usage to Speed up Complex Tasks and Model Training

By component, the market is divided into hardware (servers, storage, networking equipment, etc.), software (AI/ML frameworks, data management solutions, etc.), and services (managed services, professional services, etc.).

The hardware segment led the market in 2023 and is expected to showcase the highest CAGR during the forecast period. Hardware forms the basis for creating dependable, high-performance infrastructure to accommodate modern computing requirements, which encompass a wide range from conventional enterprise applications to cutting-edge technologies such as big data analytics. Besides, there is a growing trend toward using specialized hardware to speed up complex tasks and model training. The component demand is also increasing owing to the rising need to manage the growing amount of data processing and storage.

The software segment is anticipated to foresee substantial growth over the forecast period. Software, ranging from operating systems to application-level solutions, plays a crucial role in the management of data flows, the analysis of performance metrics, and the assurance of security and compliance.

By Data Center Type

Rising Demand for Colocation Data Centers to Ensure Segmental Growth

By data center type, the market is classified into hyperscale data centers, colocation data centers, edge data centers, and others (enterprise, hybrid, etc.).

The colocation data center segment captured the largest AI data center market share in 2023. Colocation facilities provide adaptable scalability choices, enabling tenants to adjust their IT infrastructure rapidly and effortlessly in response to evolving business requirements. Furthermore, the benefits of scale empower colocation providers to furnish cost-efficient security and connectivity solutions, reducing operational costs for leaseholders. Besides, colocation facilities are able to handle large volumes of data, enable predictive maintenance, and provide integration with other solutions. These factors have ensured the segmental hold over the market in recent years.

The hyperscale data center segment is expected to grow at the highest CAGR during the forecast period, as they are designed to scale rapidly and efficiently to support massive amounts of data and workloads.

By Industry

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Massive Demand for Data Storage to Drive AI Data Center Demand across the IT and Telecom Sector

Based on industry, the market is divided into healthcare, retail, IT and telecom, BFSI, automotive, media & entertainment, manufacturing, and others.

The IT and telecom segment captured the highest market share in 2023. IT & telecom companies are undergoing digital transformation initiatives to modernize their infrastructure, applications, and services. Data centers play an important role in supporting these initiatives by providing the computing power, storage capacity, and networking capabilities needed to deploy new technologies and deliver innovative digital services. The deployment of advanced software and applications is increasing in the IT sector, and the surge in internet users, 5G, and IoT is creating a massive demand for data storage, creating substantial data volume. These factors are driving AI-based data center demand in the IT & telecom sector.

The healthcare segment is estimated to showcase the highest CAGR during the forecast period as the sector deals with sensitive financial and personal data, making security and compliance paramount. Data centers provide secure environments equipped with robust physical and cybersecurity measures to protect against data breaches.

AI DATA CENTER MARKET REGIONAL OUTLOOK

Geographically, the market is studied across North America, South America, Europe, the Middle East & Africa, and Asia Pacific.

North America

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North America held the highest market share in 2023. The expansion in this region is due to the early acceptance of data centers, driven by the growing need for big data, data processing, storage, and analysis. The rising demand for advanced AI and cloud computing-based platforms and the rapid adoption of AI technology across North American countries are driving the regional AI data center market.

According to industry experts, the global investment in AI technology reached USD 154 billion, an increase of 26.9% from 2022, with spending on AI-centric systems expected to surpass USD 300 billion in 2026.

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The U.S. market is currently a prime location for investments in data centers. According to a report by industry experts, the demand for data centers in the U.S. is expected to increase by 10% annually until 2030. The country represents approximately 40% of the global demand, with Germany, Britain, and China following closely behind. Currently, Northern Virginia has the largest data center market globally, with over 275 facilities. Furthermore, substantial construction is underway in Dallas/Ft. Worth, Chicago, and Silicon Valley are anticipated to drive market growth over the coming years.

South America

South America is expected to showcase a notable CAGR over the forecast period. Rising investments in digital transformation across South American countries such as Brazil and Argentina majorly drive this notable growth. In addition, the countries tend to have lower environmental regulations than the U.S. and Europe. Therefore, high-tech companies looking for chip factory and data center locations are targeting South America. AI-based data centers are gaining popularity in the region as the volume of data processed in the region has doubled since 2020. As per CBRE, processing volume is expected to grow more than 9% between 2024 and 2029.

Europe

Europe stands second in terms of generating revenue for the market. This regional growth is attributed to the rise in machine learning and AI investments, along with the extensive utilization of high-performance computing in sectors such as healthcare and automotive. In addition, data center expansion is happening in major European cities such as London, Dublin, Frankfurt, Amsterdam, and Paris. Despite power sourcing availability challenges, significant development and major project deliveries are anticipated in 2024.

Middle East & Africa

The Middle East & Africa market is expected to grow at the second-highest CAGR over the forecast period owing to factors such as digital adoption gaining momentum across the country, governments executing multiple national initiatives, and others. In addition, the UAE is a top location for data centers in the region due to its strong and competitive digital economy. Furthermore, in Africa, the data center sector is attracting the attention of hyperscalers and investors, catalyzed by significant market opportunities in countries including Kenya, Egypt, Nigeria, South Africa, and Morocco. Thus, increasing investment in data centers is estimated to boost the market growth in the region.

Asia Pacific

The Asia Pacific market is estimated to grow at the highest CAGR during the forecast period. The convergence of cloud computing and artificial intelligence is reshaping industries, and the region stands at the forefront of this transformation. As businesses strive to stay competitive and meet the demands of an increasingly connected world, the demand for robust data center infrastructure has surged.

• In 2023, according to the London Stock Exchange, the region’s data center deals hit a record of USD 3.45 billion. Asia Pacific is experiencing an unprecedented need for data center infrastructure due to the rapid increase in digital data, driven by the widespread use of connected devices, IoT sensors, and new technologies.


• According to a 2024 report by industry experts, the demand for AI and data center storage capacity is projected to increase from 10.1 zettabytes (ZB) in 2023 to 21.0 ZB in 2027, representing a five-year CAGR of 18.5%.

COMPETITIVE LANDSCAPE

Key Industry Players

Strategic Alliances and Investments Pave the Way for Growing Business Trajectories

The AI data center market comprises several key players that offer specialized hardware, software, and integrated solutions specifically developed to handle the demanding AI workloads. These players enter into relevant acquisitions and collaborations, which pave the way for their growing business trajectories. In addition, the market players are making major investments to expand their data center presence across emerging markets. Furthermore, the players are also investing in developing their product expertise, especially the AI hardware expertise. This strategy helps market players cater to the end user’s evolving requirements.

Major Players in the AI Data Center Market

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The top 5 players capture around 53% - 56% market share owing to their cloud infrastructure dominance, rich data center networks, colocation services expertise, and AI hardware specialization. In addition, these players heavily invest in R&D activities for AI technologies. This strategy helps them stay ahead of their competitors. The global AI data center market comprises the top 5 large-scale players, accounting for around 54% of the market share.

List of Key AI Data Center Companies Profiled:

• Amazon.com, Inc. (U.S.)


• Microsoft Corporation (U.S.)


• Alphabet Inc. (U.S.)


• Equinix, Inc. (U.S.)


• Digital Realty Trust, Inc. (U.S.)


• Intel Corporation (U.S.)


• NVIDIA Corporation (U.S.)


• Stack Infrastructure (U.S.)


• CyrusOne (U.S.)


• QTS Realty Trust, LLC (Kansas)


• OVHcloud (France)


• Alibaba Cloud (China)


• NTT Communications (Japan)


• G42 (UAE)


• Etisalat Group (UAE)


• STC Solutions (Saudi Arabia)


• Atos (France)


• Cerebras (U.S.)


• Ampere Computing LLC (U.S.)


• Graphcore (U.K.)

KEY INDUSTRY DEVELOPMENTS:

• June 2024: HPE completed its strategic partnership with Nvidia with the aim of offering turnkey AI private cloud solutions that would help businesses deploy gen AI use cases at speed.


• April 2024: Google invested over USD 640.62 million in a data center in the Dutch city of Groningen. With this investment, the company expects to create over 125 new job opportunities for the public. The company even reported prioritizing sustainability and a positive impact on the local community while building the new data center.


• March 2024: Schneider Electric completed its strategic collaboration with NVIDIA with the aim of enhancing data center infrastructure. The company, Schneider, is expected to use its data center infrastructure capabilities and NVIDIA's enhanced AI technologies to launch data center reference designs. The designs are expected to transform the benchmarks for AI deployment and operation within the data center landscape.


• January 2024: Stack Infrastructure reported expanding its data center expertise with high-density racks with the aim of supporting the increasing demand for ML workloads. The company would support high-density workloads through a closed-loop water cooling system.


• August 2023: CyrusOne introduced Intelliscale, an AI workload-specific data center solution particularly designed to meet the increased demand for AI applications and services.

INVESTMENT ANALYSIS AND OPPORTUNITIES

The market has been witnessing a surge in investments related to the data center powered by AI ecosystem. This rise is driven by the increasing adoption of artificial intelligence across several industries. Significant future opportunities lie in sectors such as confidential computing, generative AI, and others, with sustainability and energy efficiency becoming integral parts of investment strategies. In addition, there are several investments highlighting market players aiming to expand their data center expansion. For instance,

• July 2024: CyrusOne raised around USD 7.9 billion with the aim of developing more data centers to meet the demand from the AI boom. The investment will be used to fund future and existing development projects in the U.S.


• July 2023: QTS Realty Trust, LLC and Blackstone, in tandem, spent over USD 8 billion to develop new data centers to prepare for the AI boom.

REPORT COVERAGE

The report offers its readers a detailed overview of the market and focuses on crucial aspects such as key players, their product types, and their use cases in the market. In addition, the report provides insights into the market trends and highlights recent market-related developments. Besides the report also includes several factors that contributed to the growth of the market in recent years.

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REPORT SCOPE & SEGMENTATION