July2025

Mckunsey

&company

Whatisadatacenter?

AdatacenterisafacilitythathousesandrunsITinfrastructurethat’scriticaltothedigitaleconomy,particularlygenAI.

WhenyoutypeaquestionintoagenAIplatform,youreceiveananswersofastthatitmay

feellikemagic.Ofcourse,it’snot:The

modelsthatmanyofusrelyon

,bothpersonallyand

professionally,aretheresultofdecadesofresearchandtrillionsofdollarsofinvestments—nottomentionvastandever-increasingamountsofenergy.

DatacentersarespecializedfacilitiesthatmanageITinfrastructure,includingservers,storagedevices,andnetworkequipment.Theyplayacriticalroleinprocessing,storing,anddistributinglargeamountsofdata,makingthemessentialto

genAI

andtherestofthedigitaleconomy.

McKinseyanalysisindicatesthatby2030,datacenterswillneed

$6.7trillionofworldwide

investmenttokeeppacewiththedemandforcomputepower—around70percentofwhichwillcomefromAIworkloads(Exhibit1).“Overthenextdecade,”saysMcKinseySeniorPartner

PankajSachdeva

,“theindustrywillgothroughan

S-curveofdemandgrowth

tosupportthe

infrastructurethatwillpowerthedigitalrevolutionandcontinuetopowerthe

cloudrevolution

.”

Notonlywillexistingdatacentersneedtobecomemorepowerful,butnewdatacenterswillalsoneedtobebuiltapace.Howcantheworldmeetthisquicklygrowingdemand?FindoutthisandmoreinthisMcKinseyExplainer.

LearnmoreaboutMcKinsey,s

Technology,Media&TelecommunicationsPractice

,

Whatiscomputepower?

Computepowerisemergingasoneofthisdecade’s

mostcriticalresources

.TheriseofAIhasledtoskyrocketingdemandforcomputepower,orthehardware,processors,memory,storage,andenergyneededtooperatedatacenters.

Whatarethecorecomponentsofadatacenter?

Therearefourcorecomponentstomostdatacenters:

—ITequipment,Datacentershostservers,storagedevices,andnetworkdevicesthathandledataprocessing,storage,andtransmissionsneeds.

—Infrastructureandutilities,Datacentersareequippedwithair-conditioning,redundant

electricitysystems,andelectricityconditioningtoensureuninterruptedoperations.

—Connectivity,Datacentersaretypicallylocatednearhigh-bandwidthfibernetworksthatenablelow-cost,high-speeddataexchange.

—Physicalsecurity,Robustphysicalsecuritymeasures,includingfiresuppressionsystems

andrestrictedaccess,aretypicallyimplementedtoprotectthecenter’sequipmentanddata.

LearnmoreaboutMcKinsey,s

Technology,Media&TelecommunicationsPractice

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Whatisadatacenter?2

Whatisadatacenter?3

Exhibit1

BothAlandnon-AWorkloadswillbekeydriversofglobaldatacentercapacitydemandgrowththrough2030.

Estimatedglobaldatacentercapacitydemand,'continuedmomentum'scenario,gigawatt

219

3.5x

2025-30change

Non-AIWorkload

AIWorkload

2025

2026

2027

2028

2029

2030

2025-30total

IncrementalAlcapacityaddedperyear,gigawatts

13

21

22

31124

Note:Figuresmaynotsumtototals,becauseofrounding.

source:MckinseyDatacenterDemandModel;Gartnerreports;IDCreports;Nvidiacapitalmarketsreports

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HowisAIinfluencingthegrowthofdatacenters?

AI’sboomhasfueled

skyrocketingdemandforpower

.Asnotedabove,70percentoftheprojecteddemandfordatacentercapacitywillcomefromAI-basedworkloadsby2030.

McKinseyanalysissuggeststhatinamidrangescenario,demandforAI-readydatacenter

capacitywillriseatanaveragerateof33percentperyearbetween2023and2030.GenAI,

currentlythefastest-growingadvanced-AIusecase,willaccountforaround40percentofthetotaldemand(Exhibit2).

TokeepupwiththerapidriseofAI,

datacentershavebecomebiggerandmorepowerful

.Tenyearsago,acenterwith30-megawattcapacitywasconsideredlarge;today,a200-megawattcampusisconsiderednormal.AI-readydatacentersconsumeanespeciallylargeamountof

Exhibit2

Whatisadatacenter?4

Alisthekeydriverofgrowthindemandfordatacentercapacity·

EstimatedglobaldatacentercapacityDemandforadvanced-Alcapacity,'

demand,'gigawatts%oftotaldatacentercapacitydemand

250

200

150

50

20232030

20232030

1MidrangescenarioisbasedonanalysisofAadoptiontrends;growthinshipmentsofdifferenttypesofchips(application-specificintegratedcircuits,graphics

processingunits,etc)andassociatedpowerconsumption;andthetypicalcompute,storage,andnetworkneedsofAIWorkloads.Demandismeasuredbypowerconsumptiontoreflectthenumberofserversafacilitycanhouse.

source:MckinseyDatacenterDemandmodel

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energybecauseoftheirhighaveragepowerdensities—thatis,theenergyconsumptionofserversintheracks.Averagepowerdensitieshavemorethandoubledinjusttwoyearsandareexpectedtorisenearlyfourtimesby2027.

HyperscalersincludingAmazonWebServices,GoogleCloud,MicrosoftAzure,andMetaarethecompaniesfuelingmostoftoday’sincrementaldemandforAI-readydatacenters.That’sbecausethesehyperscalersrequiremassivecapacitytohostboththelargemodelsthey

developin-house,suchasGoogle’sGemini,andthosedevelopedbyAIcompanies,suchas

OpenAI’sChatGPT.Cloudserviceproviderscurrently

ownmorethanhalf

theworld’sAI-readydatacenters.McKinseyestimatesthatby2030,upto65percentofAIworkloadsinEuropeandtheUnitedStateswillbehostedonhyperscalers’infrastructure.

Mostothercompaniesareusingoff-the-shelfmodelsthatarelargelyhostedonapubliccloud.

ButasAImatures,moreorganizationsarelikelytobuildandtraintheirownmodelsbasedoninternaldata,whichcouldincreasedemandforprivatehosting.

Whatisadatacenter?5

WhatdonewAI-readydatacentersrequire?

Thehigherenergydemandandpowerdensity,aswellasthecomplexityofdifferentAIworkloads,areleadingtorapidchangein

threemainareasofdatacenterconstruction

:

—Locationandpowerinfrastructure,Asdatacentersproliferate,powersupplyisbecominganissueinmarketsthathavetraditionallyattractedclustersofdatacenters,suchasNorthernVirginiaandSantaClara,California,intheUnitedStates.Manyutilitiesfindthattheyhaven’tbeenabletobuildtransmissioninfrastructurequicklyenough,raisingconcernsthatthey

maybeunabletogeneratesufficientpowerinthefuture.InadequatepowergenerationcanslowdatacenterexpansionandaffecttheoverallconsumerandbusinessuseofAI.

—Mechanical(cooling)systemdesign,AIserversconsumesomuchenergythattheyget

physicallyhot,somuchsothatair-basedcoolingsystemscan’tkeepup.Thisissuehas

promptedashifttoapproachesthatremoveheatdirectlyfromracksbyusingliquid,whichismoreefficientatabsorbingandtransferringheatthanair:forexample,rear-doorheat

exchangers,direct-to-chiptechnology,andliquidimmersioncooling.

—Electricalsystemdesign,AIworkloadscallforlargerpowerdistributionunitsthatcancopewithhigherpowerdensities—andinresponse,manydatacenteroperatorsareinstalling

largerswitchgearandfloor-mounteddistributionunits.Thesechangesreducethe

complexityaswellasthecapitalandoperationalcostsofinstallingandmaintainingmultiplesmallerunits.

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Technology,Media&TelecommunicationsPractice

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Dodatacentersalsosupportnon-AItasks?

AIworkloadsmaydominatetheconversation,butnon-AIprocessingloadsandcloudmakeupa

significantportionofdatacenteractivity

.TheseworkloadsincludetraditionalenterpriseITtaskssuchaswebhosting,enterpriseresourceplanningsystems,email,andfilestorage.Non-AItasksrequirelesscomputepowerandcanoperateefficientlyoncentralprocessingunits,ratherthanthespecializedgraphicsprocessingunitsorAIacceleratorsthatAIworkloadsrequire.

Non-AIloadsalsotendtohavemorepredictableusagepatternsandlowerpowerdensities,

whichallowforlessdemandingcoolingandenergyrequirements.Asaresult,datacentersthatfocusonnon-AIprocessingtypicallyhavedifferentinfrastructureneeds,capitalintensity,andoperationalconsiderationscomparedwiththosethatareintendedprimarilyforAIworkloads.

Whatisadatacenter?6

Whatregionalchallengesdoesthedatacentersectorface?

InEurope,thedatacentersectorfaces

severalchallenges

,includinglimitedsourcesofreliablepower,sustainabilityconcerns,insufficientpowerinfrastructure,landavailabilityissues,

shortagesofpowerequipment,andalackofskilledelectricaltradespeople.Inmajormarkets,itcantakeuptofiveyearsormoretosupplypowertonewdatacenters,andthepowergridis

increasinglystrained.Meetingthesedemandswillrequirealotofcleanenergy,whichwillinturnrequiretheconstructionofmorenewenergysystemsthatcanbeturnedonintimesof

especiallyhighdemand.

IntheUnitedStates,thedatacentersectorfacesmoresignificantchallenges,particularlyintermsof

powerconnectionsandlaborconstraints

.Thereisalsoashortageofelectricaltradeworkers,whichaffectstheabilitytoexecuteprojectsontimeandcandelaythebuildingof

datacentersandassociatedpowerinfrastructure.Tariffshavealsoincreasedanelementofuncertaintyandcouldpresentadditional

supplychaincomplexities

.

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Technology,Media&TelecommunicationsPractice

,

Howcanenergyplayersgetinvolvedinthedatacentersector?

Investorshave

plentyofopportunities

toparticipateandcanenablesolutionsforpoweraccessandsources.Hereare

fourhigh-potentialareas

:

—Secondarymarketswithaccesstoreliable,cheappower,There’satiminggapbetween

datacenterbuilds—whichcanbedonein18to24months—andpowerinfrastructure

development,whichcantakeanywherefromthreetotenyears(sometimesevenmore)to

complete.Buttherearecreativewaystobridgethisgap.Manyhyperscalersarebuildingoutcapacityinnew,nontraditionallocationsoutsidecoredatacentermarketsbecausethese

areashaveaccesstocheaper,availablepoweraswellasthepotentialtobuildcarbon-freeinfrastructure.IntheUnitedStates,Iowa,Wyoming,Indiana,andOhioeachhouseorhavereceivedinvestmentsfromatleasttwoofthetopfourhyperscalers.

—Behind-the-metersolutions,Thesesolutionsprovidepowerinareaswhereutilities

providerscannotkeepupwiththepaceofdemandorreliabilityrequirementsas

transmissionconstraintsortheavailabilityoflocalpowersupplyworsen.Forexample,

thereareopportunitiesforinvestorstobuildpowerthatcanbefullyislandedoutsidethegridorprovidesupplementalpower(suchasnuclear)tocomplementtheexistinggrid.

Whatisadatacenter?7

—Sustainabilityambitionsdrivenbyrenewable-energyproviders,Hyperscalersthathave

madeclimatecommitmentswillrequirehundredsofterawatt-hoursofcleanenergytomeetfuturedemand.Solarand

onshorewind

areexpectedtogeneratemostoftheworld’snewcleanenergy,butothercleanenergytechnologiescanalsosupplyenergyinthemediumto

longterm.Thesesourcesinclude

offshorewind

,nuclear,

geothermal

,gas,carboncapture

and

storage

,andcleanfuels.

—Transmissionanddistributioninvestments,Poweravailabilityiscriticallyimportantto

meetingdatacenterdemand,andutilitycompaniesaretakingnotice.Investorscanfunnel

investmentsintoutilitycompaniestobuildouttransmissionanddistributioninfrastructureinkeymarkets.

LearnmoreaboutMcKinsey,s

Technology,Media&TelecommunicationsPractice

,

Whatrolecanrealestateorganizationsplayinthedatacenterindustry?

Datacenterspresent

threemainopportunities

torealestateorganizations.Atthemostbasiclevel,realestateorganizationscanbuythelandfordatacenters—specifically,parcelsofland

thattheythinkwillgetthepower,networkconnections,andcustomerdemandneededfordatacenters—thensellorleasethislandtodatacenterdevelopers.

Realestatecompaniescanalsodopartialdatacenterdevelopment,thenselltheirfacilitiesto

developersorfinalcustomers.Finally,companiescancreatea“co-location”model:Theybuytheland,constructthebuilding,provideaccesstopowerandconnectivity,andbuildouttheinterior.Thesefacilitiesareoftenleasedbyenterprisesorhyperscalers.

“Comparedtootherrealestateassetclasses,”saysMcKinseySeniorPartner

PankajSachdeva

,“datacentershistoricallyhavehadhigheryield.Duetosupply-sideconstraints,wedon’t

anticipatethatrealestateplayersordatacenterdeveloperswillfacemajoryieldcompressionsoverthelongterm.Realestateinvestorsareseekingexposuretodatacenterstogethigher

growthand

sustainedlevelsofhigheryield

.”

HowcantelecomoperatorscapitalizeonthegrowingdemandforAIinfrastructure?

Beyondprovidingtheinfrastructurethatpowerscommunicationandconnectspeople,telecomoperatorscanbuildthe

infrastructurethatwillrealizeAI’sfullpotential

.Onewayislayingdownfastinternetcables(orfibertoconnectnewdatacenters,whichwillhelppeopleandbusinesses

Whatisadatacenter?8

access

powerfulcloudservices

).Telecomoperatorscanalsoturnunusedspaceintoprofitby

offeringAIcomputingpower,knownasgraphicsprocessingunits,orGPUs,asaserviceforrent.Anotheroptionisbuildingandrunningtheirowndatacenterstosupportthehighcomputing

powerandinternetspeedthatAIrequires.Theycouldalsoaddressadditionalgapstobridgeconnectivityplatforms.

Becausetheyalreadyhavewidecoverageandexperiencemanagingnetworks,telecom

companiesareinastrongposition.Buttheycanalsopartnerwithcompaniesthatmanufacturecomputerchips,builddatacenters,orofferothertechservices.

It’simportanttohaveaclearaspirationandambitionforcapabilitiesandinvestmentneededtosucceed,especiallyasoperatorsgofurtherupthestackfromthecoreconnectivity

infrastructure.

Toreducerisk,telecomfirmscanstartsmallbyinvestinggraduallyinAI-readyinfrastructure

andmakinguseofwhattheyalreadyhave.Clearcommunicationandanimbleapproachwillbekeytosuccess.

LearnmoreaboutMcKinsey,s

Technology,Media&TelecommunicationsPractice

,Andcheckout

jobopportunitiesrelatedtodatacenters

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Articlesreferenced:

—“

Thecostofcompute:A$7trillionracetoscaledatacenters

,”April28,2025,

Jesse

Noffsinger

,

MarkPatel

,and

PankajSachdeva

,withArjitaBhan,HaleyChang,and

Maria

Goodpaster

—“

AIinfrastructure:Anewgrowthavenuefortelcooperators

,”February28,2025,

AbhyuadayaShrivastava

,

BrendanGaffey

,

GustavGrundin

,

SebastianCubela

,and

Tomás

Lajous

,withAkshatAgarwal,DapoOrimoloye,LorraineSalazar,MiguelFrade,andNicholasShaw

—“

Howhyperscalersarefuelingtheracefor24/7cleanpower

,”December18,2024,

Lorenzo

MoaveroMilanesi

,

TjarkFreundt

,and

YuitoYamada

,withFridolinPflugmannandMarc

Ludwig

—“

AIpower:Expandingdatacentercapacitytomeetgrowingdemand

,”O(jiān)ctober29,2024,BhargsSrivathsan,

MarcSorel

,andPankajSachdeva,withArjitaBhan,Haripr