Artificial Intelligence

AI to drive 165% increase in data center power demand by 2030

Computer data center

The explosion in interest in generative artificial intelligence has resulted in an arms race to develop the technology, which will require many high-density data centers as well as much more electricity to power them.

Goldman Sachs Research forecasts global power demand from data centers will increase 50% by 2027 and by as much as 165% by the end of the decade (compared with 2023), writes James Schneider, a senior equity research analyst covering US telecom, digital infrastructure, and IT services, in the team’s report.  

Recent Chinese developments, and particularly the AI model known as DeepSeek, have raised concern about the returns on current and projected AI investment. Still, several questions remain about DeepSeek’s training, infrastructure, and ability to scale. “In the long run, if we see efficiency driving lower capex levels (from either hyperscalers or new investment plans from new players), this would mitigate the risk of long-term market oversupply we see in 2027 and beyond – which we think is an important consideration that could drive more durability and less cyclicality in the data center market,” says Schneider.

On the demand side for data centers, large “hyperscale” cloud providers and other corporations are building large language models (LLMs) capable of natural language processing and understanding. These models must be trained on vast amounts of information, using power-intensive processors.

On the supply side, hyperscale cloud companies, data center operators, and asset managers are deploying large amounts of capital to build new high-capacity data centers.

Taken together, the balance of data center supply and demand is forecast by Goldman Sachs Research to tighten in the coming years. The occupancy rate for this infrastructure is projected to increase from around 85% in 2023 to a potential peak of more than 95% in late 2026. That will likely be followed by a moderation starting in 2027, as more data centers come online and AI-driven demand growth slows.

How much power will data centers require for AI?

At present, Goldman Sachs Research estimates the power usage by the global data center market to be around 55 gigawatts (GW). This is comprised of cloud computing workloads (54%), traditional workloads for typical business functions such as email or storage (32%), and AI (14%).

By modeling future demand for each of these workload types, our analysts project power demand will reach 84 GW by 2027, with AI growing to 27% of the overall market, cloud dropping to 50%, and traditional workloads falling to 23%.

This baseline scenario could, however, be affected by a deceleration in usage by AI — for example, if the transition to AI-driven work and AI monetization doesn’t develop as quickly as anticipated. In such muted scenarios, demand could diverge from the baseline estimate by 9-13 GW.

The global landscape of data center supply

The current global market capacity of data centers is approximately 59 GW. Roughly 60% of this capacity is provided by hyperscale cloud providers and third-party wholesale data center operators (these providers usually have a small number of very large enterprise customers). The remaining belongs to more traditional corporate and telecom-owned data centers.

The AI-dedicated data center is an emerging class of infrastructure. Although very few exist so far, they’re designed for the unique properties of AI workloads — high absolute power requirements, higher power density racks, and the additional hardware (such as liquid cooling) that comes with it. They’re usually owned by hyperscalers or wholesale operators.

Regionally, Asia Pacific and North America have the most data center power and square footage online today — most notably in regions such as Northern Virginia, Beijing, Shanghai, and the San Francisco Bay Area. These places have high compute and data traffic as well as robust corporate campus demand.

How data center supply is rising around the world

Goldman Sachs Research estimates that there will be around 122 GW of data center capacity online by the end of 2030. The mix of this capacity is expected to skew even further towards hyperscalers and wholesale operators (70% versus 60% today). Although Asia Pacific has added the most supply over the past ten years by a wide margin, North America has the most scheduled capacity coming online over the next five years

Given the higher processing workloads demanded by AI, the density of power use in data centers is likely to grow as well, from 162 kilowatts (kW) per square foot to 176 kW per square foot in 2027. (These figures exclude power overheads such as cooling or other functions related to data center infrastructure.)

“Data center supply — specifically the rate at which incremental supply is built — has been constrained over the past 18 months,” Schneider says. These constraints have arisen from the inability of utilities to expand transmission capacity because of permitting delays, supply chain bottlenecks, and infrastructure that is both costly and time-intensive to upgrade.

Power demand from data centers will require additional utility investment

As data centers contribute to a growing need for power, the electric grid will require significant investment. Goldman Sachs Research estimates that about $720 billion of grid spending through 2030 may be needed. “These transmission projects can take several years to permit, and then several more to build, creating another potential bottleneck for data center growth if the regions are not proactive about this given the lead time,” Schneider says.

In Europe too, a data center-led surge in power demand is under way, after 15 years of decline in the power sector. Having surveyed utilities across the continent, Goldman Sachs Research found that the number of connection requests received by power distribution operators (a leading indicator of future demand) has risen exponentially over the past couple of years, mostly driven by data centers.

"We estimate a potential 10-15% boost to Europe’s power demand, over the coming 10-15 years,” Alberto Gandolfi, head of the pan-European utilities team for Goldman Sachs Research, writes in a separate report. Goldman Sachs Research estimates a data center pipeline for Europe amounting to about 170 GW, equivalent to about one-third of the region's power consumption.

“It is unclear at this point whether DeepSeek would have a positive or negative impact on the ‘data center bull case thesis’ for Europe,” Gandolfi writes in another note. “Yet we stress that around 35-40% of a hyperscaler's energy consumption is from cooling, which would be similar across technologies.”

The investing landscape in the data center market

Goldman Sachs Research foresees an increasing breadth of investment opportunities as the data center market expands:

  • Hyperscalers: Enterprises are pushing to integrate AI and machine learning tools into their tech stacks to drive core businesses, which will benefit hyperscalers. “As we progress further up from the ‘infrastructure layer’ into the ‘AI model/platform layer’ and, ultimately, the ‘application layer,’ the hyperscalers’ ability to generate a return on this compounded level of capex has becoming increasingly top of mind for investors,” Schneider writes.
  • Asset managers: Given a longer time horizon to fully develop data center infrastructure, companies that can raise long-dated pools of private capital will have a potential advantage relative to investors with shorter time horizons.
  • Utilities: The expansion of the power grid is among the chief future possible constraints to data center supply.
  • Data center operators: Major data center operators with significant asset footprints that serve the likes of hyperscale cloud companies as well as large enterprise customers will be well-positioned to meet the expected surge in global demand.

 

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