Executive Summary
Global data center capacity is facing unprecedented demand pressure from AI workloads, cloud migration, and digital transformation initiatives. Our analysis identifies power availability and suitable real estate as the binding constraints, with implications for hyperscaler expansion strategies and infrastructure investment.
Demand Drivers
AI training and inference workloads are fundamentally changing data center power density requirements. Traditional enterprise workloads require 5-10 kW per rack, while AI-optimized configurations demand 40-100 kW per rack. This 10x increase in power density is straining existing infrastructure and requiring purpose-built facilities.
Supply Constraints
- Power: Grid interconnection timelines extending to 4-6 years in key markets
- Real estate: Suitable land with power access increasingly scarce near population centers
- Equipment: Transformer and switchgear lead times at 18-24 months
- Labor: Skilled construction and operations workforce constraints
Geographic Implications
Power constraints are driving geographic diversification of data center development. We observe accelerating investment in regions with abundant renewable energy (Nordic countries, Pacific Northwest) and favorable regulatory environments. Secondary markets with available power capacity are commanding premium valuations.
Investment Thesis
The supply-demand imbalance in data center capacity creates favorable conditions for infrastructure owners with existing power entitlements and land positions. We identify particular value in assets with expansion optionality and proximity to renewable energy sources, which command 15-25% valuation premiums.