Generative artificial intelligence (genAI) drove a significant increase in data center capex during the first half of the year, growth that is placing significant pressure on the market’s energy requirements.
Dell’Oro Group found that worldwide data center capex surged 38% during the first half of this year compared to 2023, which it tagged to spending on accelerated servers that are powering genAI use cases. This included servers using “Nvidia Hopper GPUs and custom accelerators, such as Google’s TPU and Amazon’s Trainium” that “gained traction among hyperscale cloud service providers.”
This insight affirmed previous reports that found hyperscalers were driving significant new investment into the data center space.
Synergy Research Group (SRG) noted that hyperscalers now control more than 1,000 total large data centers around the globe, which accounts for 41% of the worldwide capacity of all data centers. Just over half of that hyperscaler capacity is from own-build, owned data centers with the remaining portion from leased facilities.
SRG chief analyst John Dinsdale also noted that enterprises are also planting more of their gear in colocation facilities, which is reducing their overall on-premises data center capacity and is a practice expected to continue to increase as enterprises tap more into AI services.
“The rise of generative AI technology and services will only exacerbate those trends over the next few years, as hyperscale operators are better positioned to run AI operations than most enterprises,” Dinsdale wrote.
Research firm ISG earlier this year also noted that the average large enterprise is planning to nearly double their number of AI-enabled applications by the end of this year. This will see that average grow from 250 applications that were AI-enabled at the end of 2023, to 488 AI-enabled applications by the end of 2024.
Dell’Oro Group pegs full-year data center capex as growing 35% compared to 2023, hitting $400 billion in total segment revenues. This will be led by those large-scale cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP).
“We are – and we’ve talked about now for quite a few quarters – we are constrained on AI capacity,” Microsoft CFO Amy Hood said during a Microsoft’s latest earnings call. “And because of that … we’ve … signed up with third parties to help us as we are behind with some leases on AI capacity. We’ve done that with partners who are happy to help us extend the Azure platform, to be able to serve this Azure AI demand. And you do see us investing quite a bit as we’ve talked about in builds so that we can get back in a more balanced place.”
However, they also remain cognizant of how they manage that investment.
Amazon CEO Andy Jassy during the company’s second-quarter earnings call acknowledged that it’s important to have enough capacity in place to support growing AI-infused data center traffic, but “if you actually deliver too much capacity, the economics are pretty woeful and you don’t like the returns of the operating income.”
“The reality right now is that while we’re investing a significant amount in the AI space and in infrastructure, we would like to have more capacity than we already have today,” Jassy added. “I mean we have a lot of demand right now. And I think it’s going to be a very, very large business for us.”
https://www.sdxcentral.com/articles/analysis/genai-drives-data-center-investment-energy-consumption/2024/09/
