Datacenter capex to grow by 11% in 2024

Capital expenditure (Capex) for datacenters is expected to grow by 11% in 2024, resuming a cycle of expansion, according to a report published recently by Dell’Oro Group. Worldwide, Capex associated with datacenters is expected to rise from the level of just 4% recorded in 2023. Generally speaking, in the context of datacenters, Capex refers to the amount spent on acquiring, updating and maintaining physical assets, buildings, hardware, or software.

“There has been a slowdown in the deployment of general-purpose servers and storage resources in the market, despite the increase in investments related to Artificial Intelligence. While major players such as Microsoft, Google and Oracle have increased investments in datacenters in the year to 2023, other cloud service providers, such as Amazon and Meta, have reduced the amounts allocated to datacenters,” says Baron Fung, senior research director at Dell’Oro Group.

According to the executive, the outlook for 2024 is more optimistic. New Artificial Intelligence (AI) applications will be an important driver of investment in the cloud and in business environments. In addition, there should be a resumption of demand for general-purpose servers after a prolonged period of correction, due to the transition to new server platforms that enable higher-performance computing.

The Dell’Oro Group report that compiled datacenter IT Capex data for the third quarter of 2023 also highlights that revenue for servers and storage systems is expected to grow by more than 20% in 2024, while the figures for networks and infrastructures will see single-digit growth.

Hyperscale cloud service providers are expected to increase investments in datacenters by 13% by 2024.

In absolute figures, global datacenter capex is on track to reach $400 billion by 2027. The Dell’Oro Group study predicts that hybrid clouds will generate growth opportunities for the datacenter market, both in the hyperscale and enterprise premises segments.

“Hyperscale cloud environments are expected to account for half of datacenter infrastructure spending by 2027, but there are also considerable opportunities for on-premise environments,” comments Fung, adding that companies will continually optimise IT deployments, balancing on-premise and cloud workloads. New applications will also require infrastructure at the edge, leading to the emergence of a new ecosystem.

The study points out that macroeconomic factors may hamper investment in datacenters in the short term, but advances in server architectures, accelerated computing and sustainability will make datacenters more efficient and stimulate more investment in the long term.

Datacenters, AI factories (prefabricated)

At a conference last November, Vladimir Galabov, Omdia’s research director, described today’s datacenters as Artificial Intelligence (AI) factories with important implications, such as the need to find new ways of expanding the capacity of facilities quickly.

“Datacenters are becoming AI factories, and to do this, infrastructures need to change quickly. We’re seeing a huge change in spending patterns, and a large part of budgets are going towards expanding computing power and physical facilities,” explains Galabov, predicting five years of considerable expansion in energy consumption by the datacenter industry.

Implementations of servers configured for AI are growing consistently, according to Omdia’s forecast. To take NVidia alone, revenue from datacenter solutions in the third quarter of 2023 reached $14.5 billion (almost 4x more year-on-year). This indicates, as expected by the research company, that NVidia sold almost half a million H100 and A100 GPUs in the aforementioned period.

In line with this trend, the market for prefabricated modules for datacenters grew significantly in 2023 as an enabler of the rapid expansion of datacenter power capacity, says Omdia. Demand for prefabricated power modules (switchboards, UPS, batteries, PDUs, etc.), for example, has skyrocketed, even doubling for some suppliers.

Until 2027, there should be continued growth in rack power density, better performance and server consolidation, mainly with a focus on AI models. Beyond 2027, the focus should shift to efficiency and optimising and handling the OPEX (operating expenses) of datacenters.