Analyst firm Dell'Oro Group believes that AI infrastructure spending will push data center capex to over a half trillion dollars by 2027.
However, the group predicts that near-term cloud and enterprise capex growth will decelerate as the market undergoes digestion.
"Despite near-term data center capex growth headwinds as the major cloud service providers and enterprises optimize their infrastructure, forthcoming technology transitions will stimulate long-term growth," Baron Fung, senior research director at Dell'Oro Group, said.
"Most notably, the hyperscale cloud service providers will prioritize their investments toward accelerated systems for AI applications for both their public cloud platform and SaaS offerings," Fung added.
"We will see continuous optimization across the entire data center stack, with the deployment of next-generation servers featuring high-core counts and deeper memory that are attached to next-generation networks. Meanwhile, the rest of the market will invest in accelerated systems more selectively, with most enterprises adopting a hybrid cloud strategy."
Worldwide, Dell'Oro forecasts that data center capex will grow 15 percent by 2027, while more than 20 percent of global server deployments in that year will feature some form of AI acceleration.
Last week, TD Cowen said that around ~2.1GW of data center leases were signed in just 90 days driven by AI requirements. The analysts predicted a record year for North American data center leasing.
Yesterday, Blackstone was revealed to be spending $8 billion on building out data centers due to a “once in a generation” AI boom.