AI to push data centre kit spend above $50 billion

The new figures from Dell'Oro Group is naturally good news for those making and selling data centre equipment, but there must surely be a note of caution in there for the companies getting their wallets out in the hope of making a mint from current AI hype.

Dell'Oro has revised upwards its expectations for the Data Center Physical Infrastructure (DCPI) market to a compound annual growth rate of 13% over the five-year period from 2023 to 2028 to that headline $50 billion-plus figure.

At the start of the year the analyst firm predicted a CAGR of 11% over the same period to $46 billion.

Back then Dell'Oro noted that the proliferation of accelerated computing to support AI and ML workloads had emerged as a major DCPI market driver, significantly increasing data centre power and thermal management requirements.

It shared a similar message alongside its revised forecast, noting that expectations are rising, thereby leading to investments in higher amperage power distribution, backup power to manage load variability, and liquid cooling to meet the specific physical infrastructure requirements of AI workloads.

It gave a special mention to liquid cooling, which it believes will grow to $15 billion in revenues over the next five years.

The Thermal Management, Power Distribution, and Three-phase UPS market segments will grow the fastest in the next three or so years, it said.

"To date, most accelerated computing deployments have been in facilities not fully designed to support them," said Lucas Beran, Research Director at Dell'Oro Group. "The next leg-up in the evolution of AI is accelerated computing deployed in facilities with purpose-built power and cooling infrastructure."

Beran noted that in many cases, these DCPI orders have already been placed with vendors.

"In turn, DCPI vendors have been making manufacturing investments to support increased capacity, which is expected to materialize in meaningful DCPI market growth over the next 18 months," he said.

Dell'Oro expects double-digit DCPI revenue growth for the majority of the 2023-2028 forecast period and added that it sees particularly elevated growth next year.

That pretty much tallies with what it said at the start of the year, when it predicted that growth in 2024 would slow to a high single-digit rate, before accelerating in the 2025-2028 period. It did not pass comment on this year's market specifically in its forecast update, but it's probably safe to say that spending is about where it expected, if not higher.

Cloud and colocation service providers will account for most of the growth during the forecast period, Dell'Oro said. It did not proffer comment on the part telecoms operators and enterprises are likely to play.

Whoever ends up spending these sorts of serious sums of money on this equipment needs to be confident that they can generate the revenues from AI to justify their outlay. And as it stands, that part of the equation is far from balanced.