U.S. Data Center Power Capacity Set to Soar by 2027

U.S. Data Center Power Capacity Set to Significantly Increase

Recent insights indicate that the power capacity of data centers in the U.S. is on a trajectory to nearly double by 2027. This surge is primarily powered by the escalating demand for high-performance computing (HPC), particularly in support of Generative AI (GenAI). According to a research note from Morgan Stanley, this growth reflects the broader trends in technology and data usage across sectors.

Projected Growth in Data Center Power

The investment bank's research outlines that the current power capacity of U.S. data centers, estimated at 40 gigawatts (GW) in 2024, is expected to rise sharply to 79 GW by the year 2027. This remarkable growth underscores the increasing reliance on innovative AI technologies that require enhanced computational power.

Drivers Behind Data Center Expansion

Growth in data centers, both in the U.S. and globally, is predicted to quicken significantly in the upcoming years. The primary drivers are the advancements in data centers that cater to high-performance computing environments designed for GenAI applications. This growth reflects a larger trend towards more sophisticated computing needs as industries evolve.

Global Implications and Energy Usage

From a global perspective, Morgan Stanley anticipates a dramatic rise in power usage specifically for GenAI purposes, which is projected to escalate from 68 terawatt-hours (TWh) in 2024 to an astounding 378 TWh by 2027. This increasing demand is expected to have a profound impact on overall global data center power usage, which is likely to increase from 443 TWh in 2024 to 877 TWh by 2027.

Asset-Backed Securities Market Growth

Moreover, the expansion of the data center market is also mirrored in the asset-backed securities (ABS) sector. Morgan Stanley sees data center ABS issuance possibly reaching a record $8 billion in 2024, pushing the total outstanding amount to $25 billion, illustrating a 37% increase year-over-year. Looking ahead, if current trends persist, the ABS market could swell to $49 billion by 2027, signaling a growing investment interest in data center operations.

Financial Aspects of Data Center Development

Much of the projected expansion within the data center realm is anticipated to involve new constructions. The estimated costs for these comprehensive setups fall between $30 to $34 million per megawatt (MW), though this figure drops to approximately $8-$12 million per MW when excluding the costs for GPUs and servers. This financial aspect highlights the significant investments necessary to meet future data processing demands.

Challenges in Data Center Deployment

However, Morgan Stanley points out a critical challenge: the timeline to bring new data centers online is extending, particularly in regions such as California, where projects can now take as long as 125 months. This lengthening timeline stresses the urgency for retrofitting existing data centers, including those previously utilized for bitcoin mining, to address the pressing requirements for AI and HPC data processing needs.

Frequently Asked Questions

What is driving the growth of U.S. data centers?

The growth is driven largely by the rising demand for high-performance computing (HPC) to support Generative AI technologies.

How much is the U.S. data center power expected to increase?

It is projected that U.S. data center power will increase from 40 GW in 2024 to 79 GW by 2027.

What impact will global data center power usage experience?

Global data center power usage is expected to rise from 443 TWh in 2024 to 877 TWh by 2027 due to increased demand from GenAI.

How significant is the asset-backed securities market for data centers?

The data center ABS issuance is expected to hit a record $8 billion in 2024, reflecting the growing investment opportunities in this sector.

What challenges are affecting data center development timelines?

The time to complete new data center projects is increasing, particularly in regions like California, stressing the need to retrofit existing facilities for immediate requirements.

About The Author

Hi there I'm 38-year-old author and financial consultant Owen Jenkins. Having worked in the financial sector for more than ten years, I am well-versed in the subtleties and complexity that mold our financial environment. Following a degree in finance, I worked in a number of financial institutions honing my abilities in market analysis, financial planning, and investment strategies.

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