The AI boom coupled with the trend to improve sustainability will generate investment opportunities following a challenging period for data centres

14 December 2023 | Strategy

Jay Lee

Predictions


In 2024, data-centre operators will see conditions become more favourable and get a much-needed boost thanks to emerging technologies, creating opportunities for them and the wider ecosystem. 

Recent years have been especially turbulent for the data-centre industry. Its capital-intensive business models are vulnerable to high interest rates and the industry is very exposed to volatility in energy prices. Set against a backdrop of ever-reducing unit prices and intensifying sustainability regulation, the data-centre ecosystem has been under pressure from all sides. 

Throughout 2024, operators should see inflationary pressures soften, while demand picks up. In particular, continued enterprise cloud migration will be supplemented with AI usage. Powerful growth in NVIDIA’s revenues from data-centre equipment, for example, is already being driven primarily by the emergence of AI activity. 

On the cost side, high energy prices create a clear business case for deploying the newest technologies to optimise energy efficiency, whether through improved IT equipment, innovative solutions for cooling (subaquatic, extreme latitude) or energy sources (local hydrogen fuel cells), as well as harnessing of waste heat. The benefits here are not simply reduction in direct costs; the increasing focus on Scope 3 emissions across the value chain will give sustainable data-centre players better access to funding and customers.

Innovative data-centre players will be able to plot a successful course through the current difficult conditions, with notable opportunities for: 

  1. co-location providers with the best sustainability credentials
  2. suppliers of advanced equipment (notably cooling solutions) to data centres that facilitate improved sustainability
  3. co-location providers that offer GPU-as-a-service (GPUaaS) to capitalise on AI-based demand.
Analysys Mason 2024 predictions for the TMT industry
Analysys Mason 2024 predictions for the TMT industry