Industry executives and experts share their predictions for 2024. Read them in this 16th annual VMblog.com series exclusive.
What’s in Store for the Data Center Market in 2024?
By Tom Traugott, SVP of Strategy at EdgeCore Digital Infrastructure
As we’re at the very beginning of a period of rapid and unprecedented development in the field of artificial intelligence, the relationship between data center providers, power and utilities companies, local communities and ‘hyperscalers’ (the world’s largest cloud and internet companies) will become more intertwined than ever. Hyperscalers’ requirements for ever larger amounts of capacity, density and power are driven by both aggregate campus growth and hardware density increases, as AI and large language models become more advanced. As we head into 2024, here is a roundup of my top predictions for how we can expect the data center industry to evolve in the months, years and even decades ahead, guided by the evolution of AI.
Where the power is, the data center industry will follow
As primary and historical data center markets such as Northern Virginia, Santa Clara, and Phoenix become victims of their own success, with constraints on limited power and land supply looming, we can expect to see a spillover effect to secondary and tertiary markets that are beginning to emerge quickly and will continue to do so over the next few years. These new markets, however, can’t be constructed just anywhere as they will need to be able to support the scale of the industry. When selecting these new markets, data center providers will follow the availability of power and, more importantly, where investments in power are being made to support long-term capacity and availability for their buildings.
Approaching the next generation of edge computing
As generative AI models are trained and use cases expand, in 2024 we will enter the next generation of edge and scaled computing through the demands of inference (putting the generative AI models to work locally). AI-driven supercomputing environments and databases will not stop or get smaller as they require 24/7 runtime, but they may seek to be closer to the end user in contrast to the large model training locations that can be asynchronously located. While this evolution is certainly something to watch, the next generation computing at the edge is still underway and likely another one to two years from materializing and understanding what it will actually look like, but we believe modern, state of the art power dense data centers will be required to support.
Overcoming generative AI supply challenges
While AI adoption in data centers is still in the early stages, the industry must prepare for potential challenges going into next year. For starters, a projected 1.6 to 2 million H100 GPU shipments are being put into production next year, with AMD just announcing 300K-400K of their latest MI100 GPU to deliver in 2024. Neither Nvidia nor AMD can keep up with demand – customers want more. This will only add to the demand pressures that the data center industry is experiencing now, in addition to organic cloud growth. An estimated 80 to 90 percent of these shipments will land domestically in the U.S., adding 2.5 to 3.0 gigawatts of demand pressure on the market. With the recent OpenAI corporate drama highlighting existential concerns about AI’s potential to save or destroy the world, the physical bottlenecks present a nearer-term concern as AI innovations may stall if capacity can’t be delivered to enable AI hardware to operate.
Data center providers must lead with a “people-first” mentality
As mission-critical facilities, data centers run 24/7. However, people don’t operate 24/7, and data centers can’t run themselves. Striking a balance between maintaining continuous operations and prioritizing customer and employee safety and well-being while maintaining uptime has been a challenge across the industry but is becoming even more critical going into 2024. Taking a “people-first” approach directly impacts business and can help avoid any safety issues. In addition, like many other industries, the data center industry is struggling to find and train talent. In 2024, a greater emphasis will be placed on protecting people and creating more incentives, rewards, and training programs while juggling technology’s never-ending, 24/7 demands.
Putting communities first
Before the age of AI, data centers used to fly under the radar, with community members not knowing the difference between a data center and a modern warehouse or logistics facility. Now that large investments are being made in data centers to support AI, these sites will be larger than ever, making them more prominent presences in the communities where they’re located. Data center providers must build strong partnerships and foster collaboration to bring value to their communities. There are many ways that data center providers can become more prominent members of local communities, including modernizing the aesthetics of their design, meeting and coming in below community sound requirements, listening to community feedback, implementing educational programs and workforce development opportunities for those interested in the energy industry, and more.
Looking ahead, 2024 will be a monumental year for the data center industry. It’s without a doubt that the ongoing advancements in AI, large language models, hyperscale computing and more are poised to fundamentally reshape the future of the data center industry. These technologies will be a key driver in the industry’s rapid growth, and doing our part to meet those demands will take precedence. Fostering strong connections between data centers, power and utilities companies, local communities and hyperscalers is critical as we continue to navigate this critical period of evolution.
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ABOUT THE AUTHOR
Tom leads EdgeCore’s strategy and activities around client leasing and marketing initiatives focused on client-centric growth solutions for top hyperscale and technology companies.
Tom brings to EdgeCore 19 years of experience in wholesale data centers, enabling him with valuable insight into client needs for tailored data center developments and tailored commercial models designed to enable EdgeCore clients to ensure scalability, reduce cost, and maximize flexibility. Supporting these objectives, Tom leverages his experience in site selection, acquisition, development, and leasing supporting hyperscale CSPs and information-intensive businesses, including completion of transactions totaling over 600+ MW and valued at over $1.8B. Prior to joining EdgeCore, Tom worked for Amazon Web Services, where he was accountable for strategy and execution for new and existing regions across EMEA, APAC, and the Americas, along with diligence and strategy for additional regions under evaluation. At AWS, Tom worked in a multi-stakeholder environment executing on accountabilities to scale data center infrastructure planned to exceed $1B in construction investment. Prior to Amazon, Tom was co-practice leader of Cassidy Turley’s (now Cushman & Wakefield’s) Data Center Advisory Practice, focused on end-user representation and capital markets transactions. Tom previously worked with many members of the EdgeCore team at CoreSite Realty Corporation as regional VP of Sales.
Tom holds a B.A. in Social Studies from Harvard College, with honors.
