The global data center market is undergoing a fundamental transformation. No longer simply warehouses for servers, data centers are now strategic assets at the intersection of geo-political, regulatory and economic priorities. The implications for investors, developers, lenders and operators are profound and accelerating.

Global dominance hinges on data, cloud and AI capability. Studies by the IMF suggest AI and its underlying data center ecosystem could add several percentage points to global GDP over the next five years.

The largest benefits will flow to jurisdictions combining domestic compute capacity, leading-edge research, deep capital markets and supportive regulation. The logic is straightforward. Whoever controls compute, controls AI capability, economic competitiveness and strategic advantage.

Providing resilient supply chains and flexible digital infrastructure is therefore at the forefront of the political agenda. Stakeholders worldwide are navigating opportunities against supply-chain fragility, tightening export controls and tariffs, sanctions, data and IP protection, AI competition, sovereignty and national security concerns.

Yet, these imperatives must be balanced against cost containment for shared societal goods like power infrastructure and responsible stewardship that aligns large-scale infrastructure development with community trust and local resource sustainability.

The contracting layer is where these risks are ultimately managed or lost – a sophisticated approach to collaboration and to governance, compliance, dispute resolution and risk allocation separates those who move at speed from those who stall.

The rise of sovereignty to address national security concerns and concentration risk

Geo-political conflict is reshaping the data center market. Pushing threat modelling from theoretical to operational as concerns about the physical security of digital infrastructure heighten.

Governments are now asking where sensitive workloads should sit, who controls them and whether the failure or withdrawal of a major provider could disrupt payment systems, trading venues, insurers or government services.

For hyperscalers, this is encouraging joint ventures, local entity carve-outs, sovereign region build-outs and bespoke contractual arrangements – each raising distinct structuring considerations.

For non-hyperscale operators, it creates demand for colocation, edge and mid-tier ‘sovereign-ready’ capacity, particularly where local control, certified resilience and multi-cloud architectures can be evidenced.

Customer contracts, particularly with regulated and public sector users, will increasingly need to address concentration risk, exit planning, sub-outsourcing controls, cybersecurity, audit rights and frameworks such as DORA, NIS2 and equivalents.

Digital infrastructure as Critical National Infrastructure

Data centers house highly sensitive information relating to financial markets, defence, healthcare and public services, and as such are now treated as Critical National Infrastructure (CNI) or equivalent ‘essential’, ‘important’ or 'critical infrastructure' assets in many jurisdictions.

Such designation is more than just a label, it fundamentally alters the operating model. Designated operators must register with regulators, appoint security officers, adopt prescribed cyber and physical security frameworks, conduct regular risk assessments and report incidents quickly. Non-compliance carries significant fines and personal liability.

Designation also brings enhanced government powers – mandatory information-gathering, inspection rights, directions regarding suppliers and personnel, and step-in regimes.

Critically, these obligations may conflict with hyperscaler commitments to their own regulators or customers, creating tensions in tenant negotiations requiring bespoke governance and dispute resolution mechanisms.

For investors and lenders, CNI status reshapes the transactional landscape. It can tighten FDI screening thresholds, restrict ownership structures, and constrain change-of-control, financing and security enforcement remedies. It can also affect cyber and political risk insurance pricing and narrow procurement to approved suppliers.

CNI designation – whether current or reasonably foreseeable – should therefore be modelled from the start in underwriting, structuring and exit planning, rather than treated as a late-stage intervention.

Resilient supply chain

Intensifying trade controls are impacting supply chains like never before. Advanced semiconductors are central to ‘strategic national asset’ framing, with controls increasingly extending across chips, switching gear, networking equipment and other critical hardware. As data centers become a national security priority, export and investment control regimes are tightening across the US, UK, EU and Asia-Pacific.

These regimes create a significantly more complex procurement and transactional landscape. Developers need full, multi-tier supply chain visibility, robust supplier vetting and ongoing monitoring, and contractual protections that keep pace with sanctions and export control changes. Supply contracts need to evolve with this changing landscape.

Control of digital infrastructure

Linked to trading controls is the rapid expansion of FDI and national security screening regimes, with data centers now sitting firmly within these regimes in most major jurisdictions. Investors, lenders and developers can no longer treat regulatory clearance as a back-end closing mechanic. It increasingly shapes deal structure, consortium composition, timetable and commercial terms.

Investors should map FDI and screening exposure early in any acquisition, joint venture or refinancing, stress-test consortium structures against restrictive regimes, and ensure transaction documents contain calibrated conditions precedent, long-stop dates and clear regulatory risk allocation.

Resilient (and clean) power

Access to firm, reliable power remains critical. The imperative of continuous uptime (‘five-9s’) and high energy intensity make data center electricity demand unique. Grid connections, proximity to substations and competitive pricing are priorities, alongside pressure for clean power.

Traditional grid connection, aided by securing premium strategic land, will increasingly sit alongside green PPAs, on-site generation (‘behind the meter’), hybrid solutions and long-term service agreements with gas turbine, fuel cell and battery OEMs.

Perhaps most significantly, data center demand is increasingly serving as the catalyst for bringing new energy technologies, such as small modular nuclear reactors and fusion energy, to market.

Carefully constructed PPAs and strategic joint venture frameworks will prove paramount, alongside thoughtful contractual risk allocation around price, volume, deliverability, curtailment and change of law.

Data and intellectual property protection

Intellectual property is emerging as a defining legal risk area, with considerations across the full technology stack. Collaboration is essential for speed to market, but IP risk, reward and entitlement must be allocated carefully between model developers, cloud providers and end customers, alongside rules on data usage for LLMs and AI training.

Adverse rulings or new licensing changes could force model retraining, alter compute demand, necessitate design reconfigurations, or trigger data deletion or provenance obligations. These uncertainties increase the contractual and audit burden on operators and make IP risk allocation a priority in hosting and colocation contracts.

Summary

Data centers sit at the convergence of geo-political, regulatory and economic pressures, reshaping digital infrastructure at unprecedented speed. The risks and opportunities will only grow from here.

Interlocking challenges, such as resilient and sovereign supply chains, strategic location, access to clean reliable power, cyber-security exposure, FDI and CNI restrictions, IP risk, community engagement and hyperscaler concentration, must be managed in parallel.

Any one of them can delay or derail a project, alter its economics, or restrict acceptable investors, customers and suppliers. The environment is becoming ever more complex precisely when demand for digital infrastructure has never been greater.

Navigating this complex landscape requires a sophisticated approach to collaboration, governance, compliance, dispute resolution and risk allocation. In a market where regimes are diverging quickly and capacity is needed urgently, the winners will be those that can combine speed with discipline, build resilience that keeps a strategy intact when execution comes under pressure, and have a clear view of what comes next.

This article was co-authored by Ashurst Perkins Coie Partners: Ruth Harris, Rebecca Clarke, Jane Rueger, Michael Herrera and Rebecca Cope and Ashurst Perkins Coie Risk Advisory Partner Luke Houghton.