U.S. Data Center Market Landscape 2024-2029

MARKET OUTLOOK

The U.S. data center market will witness investments of USD 148.52 billion by 2029, growing at a CAGR of 6.54% during the forecast period. The market is aided by the high use of cloud-based services across regions, followed by digitalization initiatives, the demand for streaming online entertainment content at high speeds, the deployment of Artificial Intelligence, 5G services, and other factors. The U.S. data center market witnessed investments from several colocation, hyperscale, and data center operators. Also, the south-eastern US data center market is the most developed and mature compared with other states, holding the highest share.

KEY TRENDS

Data Center Operators Making Efforts to be More Sustainable and Environmentally Friendly

• The increase in energy consumption and carbon emissions has led the operators to address these issues. Many companies in the United States data center market purchase clean, renewable energy to power their current and future facilities, reducing their environmental impact.
• Despite the high energy cost, major companies like Google, Microsoft, Digital Realty, CyrusOne, Meta (Facebook), QTS Realty Trust, and Amazon Web Services continue to procure renewable energy to reduce emissions, achieve carbon neutrality, and promote sustainability.
• In January 2024, Microsoft signed a new solar Power Purchase Agreement (PPA) of 125 MW with Apex Clean Energy in Ohio. The 125 MW Wheatsborough Solar project is currently being developed and slated to come online by 2025.

AI Transforming the Landscape of the U.S. Data Center Market

• The AI industry is set to increase the size of hyperscale data centers significantly. Even though the current AI investments haven’t fully compensated for the growth in hyperscale data centers, the capacity of these data centers, especially for AI workloads, is expected to almost triple in the next six years.
• Data centers will play a crucial role in the success of AI, but they also pose a challenge for providers. The high computational performance and energy consumption of GPUs and other specialized chips used in AI, such as ASICs and FPGAs, require massive power as rack densities rapidly increase.
• In October 2023, Meta resumed building its data centers in Temple, Texas, and Kuna, Idaho. The company updated its data center design to accommodate more powerful GPUs for AI work in the coming year. These centers will be the first to use this new design.

Sustainable and Innovative Data Center Technologies

• There is an increasing focus on sustainable and innovative data center technologies. With the growing awareness of environmental concerns and the need for energy efficiency, U.S. data center market operators are investing in cutting-edge solutions.
• Innovations like liquid cooling systems and advanced data center designs are being implemented to enhance energy efficiency and reduce heat emissions. The development of Artificial Intelligence (AI) and Machine Learning (ML) solutions is aiding in predictive maintenance, optimizing operations, and reducing energy consumption.
• Hydrotreated Vegetable Oil (HVO) fuel is being used to replace traditional diesel generators. In September 2023, Vantage Data Centers recently shared its plan to use HVO fuel instead of traditional diesel fuel in its generators. The company will likely deploy HVO fuel for generators in Santa Clara, California.

SEGMENTATION INSIGHTS

• Numerous innovative power and cooling systems have recently been launched, emphasizing sustainability. Infrastructure providers are increasingly concentrating on developing products that minimize environmental impact.
• In recent years, operators in the U.S. data center market have been implementing new and energy-efficient cooling systems intending to reduce power consumption by up to 50%. This trend is expected to continue in the forecast period as U.S. data center market vendors continually invest in developing more efficient products.
• The US data center market for liquid immersion and direct-liquid cooling solutions is experiencing strong growth owing to the increased deployment of artificial intelligence and machine learning workloads during the forecast period.
• Traditionally, data center operators have adopted VRLA batteries; however, data center operators are now moving towards lithium-ion batteries. For instance, the Ashburn data center campus of EdgeCore Digital Infrastructure is equipped with lithium-ion batteries in UPS systems.
• Traditionally, diesel fuels have been the go-to choice for operators in the U.S. data center market due to their reliability. However, with a growing emphasis on reducing carbon emissions and achieving sustainability goals, there's a noticeable shift towards more eco-friendly alternatives. One such alternative is Hydrotreated Vegetable Oil (HVO), a renewable diesel fuel gaining popularity for its environmental benefits.
• In addition to constructing and developing data centers, the U.S. data center market companies emphasize strengthening physical security, fire detection systems & monitoring and managing the facilities through a real-time Data Center Infrastructure Management (DCIM) system.

GEOGRAPHICAL ANALYSIS

• Northern Virginia is evolving into a multi-state market characterized by rapid data center developments spanning hundreds of acres. Although there's a trend towards establishing large data center campuses in peripheral regions, smaller opportunities remain available in conventional data center clusters like Ashburn.
• The state of Georgia is actively showcasing its support for the data center industry through the implementation of tax exemptions on high-technology data center equipment, extending this benefit until 2033. This initiative draws significant attention to the Atlanta market, where numerous data center projects are currently in development or planning phases.
• Constructing data centers in the Midwestern U.S. is a significant focal point for hyperscale operators as they develop facilities in key locations like Illinois, Iowa, Nebraska, and Ohio. This market is anticipated to expand steadily, driven by the activities of major hyperscale companies.
• Texas is becoming a thriving data center hub in the U.S. owing to significant activities from the colocation and hyperscale operators. Pre-leasing remains a common trend, with most new constructions committed to single users before construction begins.
• The Western U.S. region stands as a developed and mature market for data centers, hosting all the major hyperscalers like Google, Meta (formerly Facebook), and Microsoft in prime locations such as Oregon, Idaho, Utah, and California. Given its preferred location for hyperscale operators, investments in this area are anticipated to increase throughout the forecast period.
• The growth of the data center market in New York and New Jersey is primarily driven by the continuous demand for data center space, positioning the area as a key connectivity hub within the heart of New York City's financial center. Compared to other regions, this area is anticipated to see lower investments in hyperscale data centers. However, investments in edge data centers are projected to grow considerably in the coming years, particularly in areas where space is available at a premium price.

VENDOR LANDSCAPE

• The U.S. data center market features a variety of active participants and vendors, contributing to its expansion. Those vendors that provide innovative and advanced technologies stand a better chance of securing a larger US data center market share throughout the forecast period.
• Some of the top IT and support infrastructure providers active in the U.S. data center market include Arista Networks, Broadcom, Cisco Systems, Hewlett Packard Enterprise, Dell Technologies, IBM, NetApp, ABB, Caterpillar, Cummins, Eaton, Legrand, Schneider Electric, Vertiv, STULZ, Rolls-Royce Power Systems, Siemens, Delta Electronics and others.
• The top colocation operators involved in the expansion and development of data center facilities across the US data center market include Equinix, Digital Realty, Iron Mountain, STACK Infrastructure, Vantage Data Centers, CyrusOne, Switch, NTT DATA, Compass Datacenters, DataBank, QTS Realty Trust, Aligned Data Centers, and others.
• Hyperscale operators such as Meta (Facebook), Microsoft, Amazon Web Services (AWS), Google, and Apple are expanding their presence by developing new data center campuses across the United States.
• The U.S. data center market will likely witness new players' entry. In 2023, some new entrants include Rowan Digital Infrastructure, Crane Data Centers, NE Edge, Edged Energy, Corscale Data Centers, Quantum Loophole, and others. However, these new players will likely face competition from local and established global players.