From bust to boom: Investing in connectivity to combat the data centre crunch

As technologies like generative AI and cloud computing continue their rapid ascent, demand for data centre capacity across the US has reached a tipping point. Investment firm, KKR & Co. has predicted that these fast-moving technologies will boost global spending in the sector by up to $250 billion a year, and as the biggest developer of data centres in the world, the US will lead the charge.

Research we recently conducted at DE-CIX mirrors these findings. With an installed capacity of 11,200 megawatts and another 5,500 megawatts currently under construction, US data centres are scaling up to meet these demands, with an additional 12,600 megawatts already planned. This 160% increase signals substantial growth for investors looking to capture returns in a sector that is primed to not only store data, but drive entire economies.

Areas such as Northern Virginia and Dallas are poised to experience the sharpest data centre growth, each drawing considerable attention from investors eager to back the infrastructure supporting these expanding digital ecosystems.

In terms of investment, however, the challenge lies in balancing new data centre capacity with sustainability and efficacy.

Data centres are known for their high energy consumption, and as construction accelerates, so does pressure to reduce their environmental impact.

While new facilities are essential to meet data capacity demands, the industry is pivoting to methods that improve efficiency on all levels – right down to data transfer by prioritising seamless connectivity.

Smart digital infrastructure investors know that the key to solving the data centre capacity crunch lies not only in adding more data centre space, but reflecting on how data traffic itself is managed and orchestrated.

Data centres represent a unique investment opportunity. Despite astonishing growth in the sector, the demand for data infrastructure and the value of data processing continues unabated.

Real estate and infrastructure funds are increasingly exploring this market, seeing it as a convergence of technology and real estate with reliable revenue prospects. However, the scale and rapid pace of development present challenges.

Projects require high initial capital, careful site selection, and efficient construction timelines. They also need access to land and power availability, with these factors meaning that data centre construction projects are moving further afield, away from the major hubs towards new emerging hub locations, with plentiful access to (green) power generation.

With mounting attention on sustainability and connectivity as a whole, investors are also mindful of how data centres can achieve growth responsibly, understanding that community and regulatory expectations are shifting toward energy-efficient practices and low-latency transfer. This blend of potential and responsibility is shaping data centres as a compelling but complex investment opportunity.

Data centre deployments in the US are set to boom in the coming years, but smart investors will see this as more than just a ribbon-cutting exercise. The smart play is to see this as an investment in connectivity infrastructure rather than simply adding capacity to an ecosystem that’s crying out for innovation and optimisation.

Enter Internet Exchanges, or IXs, which streamline the flow of data by offering direct peering connections between networks, bypassing third-party carriers and the bottlenecks associated with the public internet. Instead of moving through multiple “hops” to get to its destination, data will have a direct pathway via IXs from A to B, reducing the data burden placed on data centres and the energy required to move it.

New data centre projects should be mindful of this potential in planning their connectivity, ensuring high bandwidth connectivity to IXs within the vicinity, or even further away, in the major hubs. Even remote IX connectivity ensures the facility is part of a larger digital ecosystem, with additional revenue potential and asset value that this entails, as well as closing major connectivity gaps in the US market.

Over the past decade, IX deployment in the US has surged by 600%, and DE-CIX data reveals that more than 80% of those IXs are now data centre and carrier-neutral. This neutrality opens the door for a range of networks to interact without being bound to a single provider, opening up more direct data pathways for greater connectivity resilience.

The future of data infrastructure isn’t just about building bigger; it’s about building smarter. As the digital economy accelerates, investments that embrace intelligent connectivity will lead the way, powering a data ecosystem that’s not only vast but efficient, resilient, and ready to combat the data centre crunch.

Ivo Ivanov is the CEO of DE-CIX. He has been CEO and chair of the Board of the DE-CIX Group since 2022. Prior to this, Ivanov was chief operating officer of DE-CIX and CEO of DE-CIX International, responsible for the global business activities of the Internet Exchange operator.

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