The global data center industry is poised for sustained expansion driven by escalating investments in artificial intelligence (AI) infrastructure, with worldwide capital expenditures (CAPEX) projected to surpass ＄1 trillion by 2029, reflecting a compound annual growth rate (CAGR) of 21% over the forecast period. This growth trajectory is underpinned by the proliferation of accelerated servers tailored for AI training and domain-specific workloads, which are expected to constitute nearly half of total data center infrastructure spending by 2029.
A pivotal shift is anticipated in the hardware landscape, as accelerators including custom-designed chips optimized for AI workloads are forecast to overtake commercial graphics processing units (GPUs) in revenue by 2029. This transition aligns with ongoing efforts by hyperscale cloud providers to enhance computational efficiency and reduce total cost of ownership. Innovations in large language model optimizations and next-generation rack-scale architectures are central to these advancements, addressing both cost and power consumption challenges inherent in scaling AI data centers.
The expansion of AI deployments will also catalyze growth in adjacent markets. Demand for high-bandwidth memory and storage solutions, encompassing solid-state drives (SSDs) and hard disk drives, is projected to rise substantially. Additionally, the Ethernet network adapter market, critical for supporting back-end networks within AI compute clusters, is expected to grow at a 40% CAGR through 2029.
While the four largest U.S.-based cloud service providers (CSPs)—Amazon, Google, Meta, and Microsoft—are anticipated to account for nearly 50% of global data center capex in 2025, select Tier 2 CSPs are positioned to significantly increase their investments in the coming years. This diversification reflects broader industry trends, with government initiatives such as the ＄500 billion Stargate Project and multi-year capex cycles from hyperscalers ensuring long-term momentum despite current sustainability challenges.
The data center ecosystem’s evolution will remain closely tied to advancements in accelerated computing, infrastructure modernization, and the strategic prioritization of efficiency gains. As AI model training methodologies continue to mature, driven by breakthroughs from entities like DeepSeek, the industry will balance immediate operational demands with sustainable, scalable growth.
