The data center sector is experiencing an unprecedented boom, fueled by the relentless demand for artificial intelligence. While some foresee a market bubble, industry leaders like Andy Power, CEO of Digital Realty, maintain that demand far outstrips supply, especially for long-term, stable contracts.
“Based on the actual real demand from real customers with real long-term, 15-year contracts, we are not in an oversupply state today,” Power stated in a recent interview. He highlighted that capacity is expected to nearly double from 103 gigawatts to 200 gigawatts by 2030, with AI workloads projected to consume half of all data center capacity by the same year. This surge in demand is driving an estimated $3 trillion in investment over the next five years, a “supercycle” that JLL characterizes as the most significant transformation since the original cloud migration.
This expansion is not without its challenges. Grid connection delays and supply constraints are creating a complex environment for development. Furthermore, concerns about financing have been voiced by industry figures like Barry Sternlicht of Starwood Capital Group, who questioned the creditworthiness of tenants, particularly those heavily reliant on AI ventures.
Power, however, remains optimistic, emphasizing the inherent stability of physical infrastructure investments. He pointed to Digital Realty’s strategy of developing data centers in key geographic locations, such as Northern Virginia, Chicago, Dallas, Singapore, Tokyo, Frankfurt, and London, to be close to consumption centers and devices.
“We are essentially in a place where demand is well outpacing supply, so the speculative data center builds, you can’t build it fast enough for the customers,” Power asserted, noting that Digital Realty’s vacancies are at an all-time low. He also addressed financing concerns by stating that major players, including Oracle, have substantial businesses beyond AI and typically prefer to own their real estate assets, indicating a strong commitment to these long-term leases.
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