Capital expenditure (capex) on data centers is expected to continue to grow to record highs, thanks to a huge investment in AI infrastructure.

Analyst firm Dell’Oro Group forecasts a compound annual growth rate (CAGR) of 21 percent worldwide, with capex hitting $1.2 trillion by 2029. That's $200 billion more than what the company forecast in February.

“We’ve raised our forecast for data center infrastructure spending, driven by the rapid adoption of AI,” said Baron Fung, senior research director at Dell’Oro Group.

“GPUs and custom AI accelerators now account for roughly one third of total data center capex, making them the single largest driver of growth. Spending is also expected to remain strong across supporting infrastructure, including racks, general-purpose compute, storage, networking, and physical facilities."

The top four hyperscalers (Amazon, Google, Meta, and Microsoft) are expected to account for half of the spend, Fung said, adding that the companies "are leading the charge with vertically integrated solutions and custom architectures aimed at optimizing performance and lowering the cost of compute. Combined with ongoing investment from both public and private sectors, this is fueling a global wave of data center expansion."

The other cloud providers, including neoclouds, are expected to grow at a CAGR of 39 percent.

Across hyperscalers, neoclouds, and colocation providers, some 50GW of new capacity is expected over the next five years.

"While a short-term slowdown may occur in 2026, long-term investments are expected to sustain growth through the forecast period,” Fung said. AI training and domain-specific workloads could represent around half of data center infrastructure spending by 2029, he added.

The huge forecast comes after reports this week that AI capex spending led the US economy this year.

Neil Dutta, head of economic research at Renaissance Macro Research, noted that AI capex contributed more to US GDP growth in the past two quarters than all consumer spending combined.