Data center spending to hit $1.2T as AI reshapes infrastructure

The global data center industry is experiencing unprecedented growth, driven by an artificial intelligence boom that’s reshaping how companies think about computing infrastructure. New research reveals that worldwide data center capital expenditure will surge at a 21% compound annual growth rate through 2029, reaching $1.2 trillion in total investment over the next five years.

This explosive growth represents far more than incremental technology upgrades. It signals a fundamental shift in how businesses process information, with artificial intelligence applications demanding entirely new categories of specialized computing hardware and infrastructure capabilities.

The hyperscaler effect

Hyperscalers—the massive cloud computing providers like Amazon Web Services, Google Cloud, Microsoft Azure, and Meta—will drive roughly half of all global data center spending through 2029, according to Dell’Oro Group, a leading telecommunications market research firm. These technology giants are accelerating investments in vertically integrated platforms, which means they’re designing and building their own custom chip architectures rather than relying solely on third-party hardware suppliers.

“We’ve revised our data center infrastructure spending forecast upward, driven primarily by the explosive growth of AI adoption,” said Baron Fung, senior research director at Dell’Oro Group. This upward revision reflects how quickly AI applications have moved from experimental projects to business-critical infrastructure requiring massive computational resources.

The strategy behind this vertical integration is straightforward: boost performance while reducing compute costs. By designing custom silicon specifically for their workloads, hyperscalers can optimize efficiency in ways that general-purpose processors cannot match.

AI chips dominate the spending surge

Graphics processing units (GPUs) and custom AI accelerators now represent approximately one-third of total data center capital expenditure, making them the primary growth driver in an industry historically dominated by traditional server hardware. This shift illustrates how artificial intelligence workloads require fundamentally different computing architectures than conventional business applications.

By 2029, accelerated servers designed specifically for AI training and domain-specific workloads could represent approximately half of all data center infrastructure spending. This projection underscores how rapidly AI is becoming the dominant force shaping data center design and investment priorities.

The top four U.S.-based cloud service providers—Amazon, Google, Meta, and Microsoft—will account for nearly half of global data center capital expenditure in 2025 alone. Meanwhile, the broader cloud segment, including neo-cloud providers and GPU-as-a-service companies, is growing even faster at a 39% compound annual growth rate.

Massive capacity expansion ahead

Beyond spending on computing hardware, the industry faces enormous infrastructure challenges. Data centers require substantial electrical power and cooling systems, and current facilities cannot support the energy-intensive demands of AI workloads. Dell’Oro projects that over 50 gigawatts of new power capacity will be added globally over the next five years—equivalent to roughly 50 large nuclear power plants worth of electrical infrastructure.

This capacity expansion involves both hyperscalers building their own facilities and colocation firms constructing shared data center spaces that multiple companies can lease. While Dell’Oro anticipates a modest dip in growth during 2026, long-term demand remains robust as AI adoption continues accelerating across industries.

Regional growth patterns emerge

Separate research from Precedence Research, a market intelligence firm, provides additional context for this growth trajectory. The global AI data center market is expected to surge from $17.54 billion this year to approximately $165.73 billion by 2034, representing a 28.34% compound annual growth rate.

North America currently dominates the AI data center market, accounting for the largest revenue share in 2024 due to robust technological infrastructure, substantial investor capital, and rapid AI adoption across various industries. The United States alone is forecast to reach $46.15 billion in AI data center market value by 2034, growing at a 28.6% annual rate.

However, Asia-Pacific is projected to be the fastest-growing region, driven by smart city initiatives, digital transformation projects, and supportive government policies. Countries across the region are implementing AI-focused regulations, while cities like Singapore, Tokyo, and Sydney are emerging as key AI infrastructure hubs.

China represents a major growth driver within Asia-Pacific, contributing to regional expansion through its expanding digital economy and significant government investments in AI infrastructure. Chinese government initiatives promoting AI adoption and data center construction are fostering this growth, including investments in innovative cooling technologies like underwater data center systems.

Business implications

This infrastructure boom carries significant implications for businesses across industries. Companies increasingly rely on cloud-based AI services for everything from customer service chatbots to complex data analysis, making data center capacity and performance critical to business operations.

The concentration of spending among major hyperscalers also means that a relatively small number of companies will control the infrastructure powering AI applications worldwide. This dynamic could influence everything from service pricing to data sovereignty considerations for businesses operating across multiple countries.

For investors and technology professionals, the data center sector represents one of the most significant infrastructure buildouts in modern history, comparable to the railroad expansion of the 19th century or the highway system construction of the mid-20th century. The scale of investment required—$1.2 trillion over five years—demonstrates how seriously the technology industry views artificial intelligence as a transformative force requiring entirely new computational foundations.