Global data center spending to top $500 bln in 2025: What you need to know

BofA Global Research projects global data center spending to surpass $500 billion in 2025 and exceed $900 billion by 2028, driven by a 23% CAGR primarily from artificial intelligence. This growth fuels substantial capital expenditure, including $280 billion for servers in 2024 (half for AI), and elevates infrastructure costs, with AI-optimized designs costing $52 million per megawatt. The rapid expansion, particularly for AI workloads, is also accelerating electricity consumption (40%+ annual growth for AI) and creating infrastructure challenges, as only 5% of existing facilities support the required high rack densities, while simultaneously attracting increased regulatory oversight on energy efficiency.

Analysis

According to BofA Global Research, the global data center market is poised for substantial expansion, with spending projected to surpass $500 billion in 2025 and $900 billion by 2028, driven by a 23% compound annual growth rate. This surge is primarily fueled by artificial intelligence, which is fundamentally reshaping capital expenditures. In 2024, AI servers are expected to account for approximately half of the $280 billion in total server spending. The infrastructure demands of AI are also escalating costs, with an AI-optimized data center estimated to cost $52 million per megawatt, a significant premium over the $39 million per megawatt for a traditional facility. This rapid growth introduces critical operational constraints, most notably in energy consumption and physical infrastructure. Global data center energy use is forecast to grow 11% annually through 2030, with electricity demand for AI workloads alone expanding at over 40% annually. A key bottleneck is that only 5% of existing data centers can support the high rack densities (above 30 kilowatts) required by newer AI chips, creating a significant upgrade and build-out cycle. Concurrently, the sector is facing increased regulatory oversight, as evidenced by the EU’s 2024 Energy Efficiency Directive, signaling a future where energy management and efficiency will be paramount.

Key Decisions for Investors

• Investors should seek exposure across the entire data center ecosystem, including AI chipmakers, server manufacturers, and facility operators, to capitalize on the sector's projected 23% compound annual growth rate through 2028.
• Prioritize investments in companies providing specialized infrastructure, such as high-density power and advanced cooling systems, which are mission-critical for overcoming the bottleneck where only 5% of current data centers can support next-generation AI.
• Consider positions in utility providers located in major data center hubs to benefit from the sector's surging electricity demand, while closely monitoring evolving energy efficiency regulations which will create distinct competitive advantages and risks.