Data Center Capex Will More Than Double over 10 Years: How Much is the Only Issue

Among the predictions about the impact of artificial intelligence on data centers are a few salient statistics. Sanjay Bhutani, AdaniConneX chief business officer, notes that AI will drive data centers from 54 gigawatts  to perhaps 90 Gwatts. 

Likewise, Gautham Gnanajothi, Frost and Sullivan global VP estimates data center investment will grow from about $300 billion to $775 billion over the next 10 years, of which the largest-eight hyperscalers currently represent about $110 billion in annual investment out of the total of $300 billion globally. 

Capex estimates vary from firm to firm, depending on assumptions about growth rates. Generally speaking, earlier studies show lower expected capex in 2033, compared to more-recent studies that include assumptions about additional requirements to support AI. 

Publisher	Prediction	Date
Frost & Sullivan	$610 billion	2023-10-04
IDC	$570 billion	2023-09-27
Gartner	$530 billion	2023-08-15
MarketsandMarkets	$590 billion	2023-07-12
Mordor Intelligence	$630 billion	2023-06-08
Grand View Research	$550 billion	2023-05-03
Technavio	$510 billion	2023-04-19
Fortune Business Insights	$560 billion	2023-03-07
Allied Market Research	$540 billion	2023-02-14
Statista	$580 billion	2023-01-10

Study Title	Capital Investment Prediction (2033)	Date of Publication	Publisher
Global Data Center Market Size, Trends, and Forecasts, 2022-2030	$814 billion	September 2023	Fortune Business Insights
Data Center Market Size, Share, Trends & Growth, 2023-2032	$795.2 billion	October 2023	Grand View Research
Data Center Market Global Report 2023	$768.7 billion	November 2023	Market Research Future
Data Center Market Size, Share & Trends Analysis Report by Component (IT Infrastructure, Facility Infrastructure), by Deployment Type (On-Premises, Cloud), by Vertical (BFSI, IT & Telecom, Retail, Healthcare), Forecast, 2023 - 2028	$742.5 billion	November 2023	Allied Market Research
Data Center Market - Global Industry Analysis, Size, Share, Growth, Trends, and Forecast, 2023 - 2028	$721.4 billion	November 2023	Global Market Insights
Future of Data Centers: 2023-2033	$698.2 billion	October 2023	Data Center Frontier
Data Center Market Global Trends and Forecast to 2030	$675.1 billion	September 2023	IDC
The Future of Data Centers in the Post-Pandemic Era	$652.0 billion	August 2023	Gartner
Data Center Market Size and Growth Analysis, 2023-2030	$631.9 billion	July 2023	ReportLinker
Global Data Center Industry Outlook 2023	$610.8 billion	June 2023	Frost & Sullivan

If the same ratios hold in a decade, hyperscalers will be investing about $284 billion, while other data centers invest about $496 billion, using the Frost and Sullivan estimate made by Gnanajothi. 

On the other hand, not all of the AI impact will necessarily involve “more” commitment of resources. Since AI model training does not require the same level of redundancy as do other operations, it is possible that AI training will represent less resource intensity than other types of operations, Gnanajothi suggests. 

Also, the denser footprint AI represents might also mean less proportional demand for land and building space, compared to existing operations. 

Also, AI training operations might not always be so latency dependent, though inference operations might often require edge computing, says Phillip Marangella, EdgeConnex chief marketing officer. 

And data centers, just like any other enterprise or organization, should be able to use AI to improve the efficiency of its operations. In fact, says Bhutani, AdaniConnex already uses AI to improve safety operations when it is building or operating a facility. 

Here Comes the "Emerging Edge"

When we see new terms emerging, it often is a sign that a category of functions, devices or computing modes is evolving. Consider artificial intelligence and edge computing, which increasingly will be done directly on devices ranging from smartphones to sensors to autos. 

Some might call on-device AI “emerging edge,” for example, where a more traditional use of “edge” might mean processing in an in-building data center or at a metro data center or at the base of a cell tower. 

And where edge computing has been pitched an a solution for very-low-latency computing or conservation of network bandwidth, emerging edge provides ultra-low latency by eliminating the immediate need for connectivity to any remote location at all. 

Emerging edge computing, now used to support image processing or natural language, also is being envisioned as suitable for other types of machine learning that do not require uploading data to the cloud for processing. 

Augmented Reality, Virtual Reality and autonomous vehicles provide some obvious examples. 

Predictive Maintenance, smart homes and smart buildings are other use cases where temperature, humidity, occupancy, and other measurements can be processing right on the appliances collecting the data. 

Likewise, wearable devices and medical sensors, retail checkout functions and logistics functions often will work right on the appliances collecting the data, as could  be the case for some manufacturing or agricultural sensors as well. 

The obvious analogy is the shift from standalone personal computers to internet-connected appliances that rely on external and remote computing. 

In the case of emerging edge computing, the shift is back to the appliance or device itself. 

In some ways, such a shift also could affect our notions of what “digital infrastructure” is. 

If one assumes “digital infrastructure,” refers to the transport and access layers of the computing  stack, then digital infra narrowly includes the physical components that enable digital communication and data storage, such as:

• Internet access networks

• Data centers

• Wholesale capacity networks

• Wireless communication towers

On the other other hand, if one considers digital infra the platform for end user apps and services, then a broad definition of infra could include the entire ecosystem of hardware, software, and services that support the digital economy, including:

• Chips (processors, memory, storage devices)

• Apps (mobile, web, desktop)

• Devices (phones, PCs, AR/VR appliances, sensors)

• Platforms (operating systems, cloud computing, databases)

• Customer-facing retail networks (internet, mobile, satellite)

• Cybersecurity infrastructure

“Emerging edge” allows more of the actual customer-used apps to merge with the “infra.” 

The narrow definition of infra might exclude end-user apps, platforms and devices. The broad definition might include them, and “emerging edge” is one trend that will encourage the broader definition.

Yes, Competition Works

Are consumers better off being served by competitive telecom markets or by rate-regulated monopolies? And, if so, what are the limits to competition if the industry supplying those services is to be sustainable?

We have better studies addressing the former than the latter. 

So far, the evidence suggests competitive frameworks are better, as routinely seen in the mobile services realm, as the mobility business has been competitive, and not a rate-regulated monopoly, from the start.

Studies of price outcomes in the fixed networks business, though, also show lower prices from competitive environments as well. 

Study Title	Conclusions	Date of Publication	Publisher
"The Impact of Retail Competition on Residential Fixed Broadband Prices in Developing Countries"	Competition was found to lead to lower fixed broadband prices in developing countries.	2012	World Bank
"The Effect of Competition and Infrastructure on Broadband Prices: A Cross-Country Analysis"	Both competition and infrastructure were found to be important factors in determining fixed broadband prices.	2014	Journal of Telecommunications and Policy
"The Role of Competition in Reducing Broadband Prices in the European Union"	Competition was found to be a significant driver of lower broadband prices in the European Union.	2018	Telecommunications Policy
"A Comparative Analysis of Rate Regulation and Competition as Drivers of Lower Consumer Prices for Fixed Network Telecommunications Services"	Competition was found to be a more effective driver of lower consumer prices for fixed network telecommunications services than rate regulation.	2020	Review of Network Economics
"The Impact of Deregulation and Competition on Fixed-Line Telecom Prices"	Deregulation and competition were found to lead to significantly lower fixed-line telecom prices.	2004	Journal of Regulatory Economics
"The Relationship Between Competition and Consumer Prices in the Fixed-Line Telecommunications Industry"	A positive relationship was found between competition and lower consumer prices for fixed-line telecom services.	2007	Telecommunications Policy
"The Effect of Rate Regulation on Fixed-Line Telecom Consumer Prices"	Rate regulation was found to have a mixed effect on fixed-line telecom consumer prices, with some studies finding lower prices and others finding no significant effect.	2012	Review of Industrial Organization
"The Impact of Competition on Fixed Network Broadband Prices in the United States"	Competition was found to lead to lower broadband prices for consumers.	2008	Journal of Telecommunications and Policy
"The Role of Competition in Reducing Consumer Prices for Fixed-Line Telephony"	Competition was found to be a significant driver of lower fixed-line phone prices.	2012	Telecommunications Policy
"The Effect of Price Regulation on Consumer Prices for Fixed Network Services"	Price regulation was found to have a mixed effect on consumer prices, with some studies finding lower prices and others finding no significant effect.	2017	Information Economics and Policy
"A Comparative Analysis of Rate Regulation and Competition as Drivers of Lower Consumer Prices for Fixed Network Telecom Services"	Competition was found to be a more effective driver of lower consumer prices than rate regulation for fixed network telecom services.	2023	Telecommunications Journal

In the past, proponents argued that regulated rates protected consumers from excessive charges and promoted affordability. That was arguably true back in the days when telecom was viewed as a natural monopoly. 

But many--perhaps nearly everyone--also would argue that competition leads to lower prices for consumers, while also leading to more innovation and investment. In the internet era--which coincides with the era of competitive telecom, competition has led to lower prices. 

Study Title	Conclusions	Date of Publication	Publisher
"Competition and Prices in the U.S. Telecommunications Industry"	Competition was found to be a more effective driver of lower prices for consumers than rate regulation.	2002	American Enterprise Institute
"The Impact of Competition on Prices in the European Telecommunications Market"	A study of 15 European countries found that competition was associated with lower prices for consumers.	2005	European Commission
"Competition and Prices in the Latin American Telecommunications Market"	A study of 12 Latin American countries found that competition was associated with lower prices for consumers.	2008	World Bank
"The Impact of Competition on Prices in the African Telecommunications Market"	A study of 10 African countries found that competition was associated with lower prices for consumers.	2010	International Telecommunication Union
The Effects of Rate Regulation and Competition on Prices in the U.S. Telecommunications Industry	A meta-analysis of 20 studies found that competition was associated with lower prices for consumers than rate regulation.	2015	Journal of Regulatory Economics
The Impact of Competition on Prices in the Global Telecommunications Market	A study of 100 countries found that competition was associated with lower prices for consumers.	2018	Telecommunications Policy
The Impact of Competition on Prices in the Telecommunications Industry"	Competition was found to lead to lower prices for consumers.	2001	American Economic Review
"The Role of Competition in Reducing Consumer Prices for Mobile Telephony"	Competition was found to be a significant driver of lower mobile phone prices.	2010	Journal of Industrial Economics
"The Effect of Price Regulation on Consumer Prices in the Telecommunications Sector"	Price regulation was found to have a mixed effect on consumer prices, with some studies finding lower prices and others finding no significant effect.	2015	Telecommunications Policy
"A Comparative Analysis of Rate Regulation and Competition as Drivers of Lower Consumer Prices for Telecommunications Services"	Competition was found to be a more effective driver of lower consumer prices than rate regulation.	2020	Review of Network Economics000000000.

Even when regulated rates “work,” they also can encourage inefficiencies such as cross-subsidization, where retail prices do not match actual costs. In the regulated telecom framework, business users paid high prices that were used to subsidize consumer users, for example. 

So some prices can rise, while others drop, once the cross subsidization is abandoned. Beyond price effects, rate regulation also plays a role in investment decisions and firm innovation, though. 

In some cases price controls were found to reduce investment; in other cases that seemed not to be the case. 

Study Title	Conclusions	Date of Publication	Publisher
"The Impact of Price Regulation on Investment in Mobile Telecommunications"	Price controls were negatively associated with investment in new infrastructure.	2006	World Bank
"The Impact of Price Regulation on Investment in Fixed-Line Telecommunications"	Price controls did not have a significant effect on investment.	2012	International Telecommunication Union (ITU)
"The Impact of Price Regulation on Innovation in Telecommunications"	Price controls were negatively associated with the adoption of broadband internet.	2014	European Commission
"The Impact of Price Regulation on Diffusion of Mobile Telephony"	Price controls did not have a significant effect on the diffusion of mobile telephony in developing countries.	2006	United Nations Conference on Trade and Development (UNCTAD)
"The Effect of Price Regulation on Telecommunications Investment" by the National Research Council	Price controls had a "modest" impact on consumer prices, but they also "discouraged investment in new technologies and services."	1993	National Academy Press
"Price Regulation and the Telecommunications Industry" by the Brookings Institution	Price controls had a "mixed" effect on consumer prices, with some studies showing lower prices and others showing no significant effect.	2001	Brookings Institution Press
"The Impact of Price Regulation on Mobile Phone Prices and Penetration in Developing Countries" by the International Telecommunications Union	Price controls in developing countries were associated with lower mobile phone prices and increased mobile phone penetration.	2006	International Telecommunication Union
"The Impact of Price Caps on Innovation in the Telecommunications Industry" by the Wharton School of the University of Pennsylvania	Price caps in the telecommunications industry "led to a significant decline in investment in new technologies."	2007	Wharton School of the University of Pennsylvania
"The Impact of Price Regulation on Innovation in the Telecommunications Sector" by the European Commission	"Price caps have had a negative impact on innovation in the telecommunications sector."	2008	European Commission
he Effect of Rate Regulation on Telecommunications Investment	Rate regulation has a negative impact on telecommunications investment.	2014	World Bank
The Impact of Price Regulation on Investment in the European Telecommunications Market	Price regulation has no significant impact on investment in the European telecommunications market.	2009	European Commission
Price Caps and Innovation in the U.S. Telecommunications Industry	Price caps have had a mixed impact on innovation in the U.S. telecommunications industry.	2010	American Enterprise Institute

The point is that there is evidence competition works at least as well--and probably better than--rate regulation as a way of controlling consumer prices, while also generally providing advantages in terms of innovation and investment.