The data center industry has been undergoing some major changes over the past couple of years. For many it’s a normal process of evolving in accordance with the latest technological advancements, but some view the situation not just as evolving, but as a redefining of the industry.
It’s definitely a very interesting time; there are multiple big challenges and changes happening in the world and they are reflecting on the data center industry as well. The entire geopolitical landscape is changing which means new rules, tariffs, movements of capital and investments, and even possible sanctions for hardware etc. Also, the need for electricity is becoming even more highlighted, especially in the wake of the recent major outage in Portugal and Spain. Then we have the pure internal challenges with the increasing computing demand because of the rise of AI, which brings the need for bigger and more powerful facilities, improved cooling, etc.
It’s a very important time in the industry and is a time for key decisions. These are critical, as they can help propel the sector to become a trillion-dollar market by 2030. This bold forecast was made by Omdia’s Vlad Galabov during the Data Center World 2025 conference. He expects that by 2030, the global data center capex would surpass the $1 trillion mark and that might even be the conservative look, he said to DataCenterKnowledge. In order for that to happen, the industry has to solve its biggest hurdles. They are in the areas of power distribution, cooling, talent shortage, and the rest of the usual issues. But Galabov thinks “most of the problems are solvable”, as long as the industry “ignores the noise” and focuses on long-term thinking and resilience in the face of constant disruption.
The world of data centers in 2025
“Our industry is having a moment. The data center industry faces unprecedented challenges across the board, skyrocketing demand, supply chain constraints, and a rapidly evolving workforce. But the most critical issue, our biggest barrier to entry in this industry, is power: sourcing it sustainability and making sure that it’s scalable for a truly AI-driven future,” says Bill Kleyman, AFCOM Data Center World Program Chair, during his opening remarks at the Data Center World 2025 conference, quoted by DataCenterKnowledge.
And everything is expanding very fast. AI’s power consumption is already exceeding expectations. It’s now forecast to reach 27% of the total energy consumption by data centers by the end of this year. Galabov adds that AI is now forming 70% of the revenue opportunity.
Dave Bell, who is the vice president of data center and microgrid development at VoltaGrid, says that currently data centers are consuming 176TWh annually and by 2027 that could jump to between 325-580TWh depending on how the industry expands. At both ends of the forecast, it’s a massive jump. Just in the US, data centers are already consuming 4.4% of the country’s total electricity usage.
“The data center market uses more natural gas than the cities of New York, San Francisco, and Chicago combined. In the U.S., we have an immense capacity for natural gas. That fuel is around everywhere. But as my grandma used to say: waste not want not,” he says.
“We can’t just think about power. We have to think about the whole supply chain. We are growing at such a rapid rate that it’s no longer about one issue. We have to think about standards. I look at some of the struggles we have in converting over to liquid cooling, which is much needed in the industry. The problem is that everything is a boutique solution. People have to come together and standardize. I think collaboration is going to be a big deal in the future,” Industry pioneer Christian Belady, who accepted the 2025 AFCOM Lifetime Achievement Award says.
The challenges ahead and how to solve them
Data centers are no longer a topic only within the IT industry. They are something major institutions and world organizations are also talking about. And the International Energy Agency (IEA) is making regular reports on how these facilities are having an impact on the global grid. The latest report gives a detailed picture which can be summarized like this: AI will be either throttled or propelled by the availability of scalable, sustainable and dispatchable electricity, says DataCenterFrontier.
So, the countries which are able to supply their data centers with the energy AI needs, will have an advantage not just in the AI race, but in shaping the IT industry, the global economy, and even the world itself. And, as a result, those who struggle will fall behind and can even be sidelined. IEA also notes that while AI is the main reason for the power struggles, it’s also one of the tools which can help tackle this challenge. As such, the agency calls for immediate and serious investments in energy generation and improving the grid, along with better collaboration between the IT and energy industries. They both need to work together to avoid critical bottlenecks. The IEA also advises countries themselves to work together to mitigate their power demands and be proactive and coordinate their actions.
The IEA provides some more figures about data centers and their energy consumption. In 2024 they consumed 1.5% of the total global electricity. The US is the biggest consumer for now – taking 45% of the total data center energy usage.
AI workloads are also changing the ways data centers function. Until now, most of the usage wasn’t actually constant. There were peak times and low moments, depending on how many users were accessing a particular cloud or other online services and apps, working in a said data center.
With AI, things are different. AI basically doesn’t idle. It’s constantly working, analyzing, crunching numbers and data, training. All of this is scaling fast and constantly.
As a result, just a single AI data center can now draw as much power as 100,000 homes. And the biggest hyperscale data center campuses which are now being made, will consume 20 times more than that. Basically, just a single hyperscale data center will be a large-scale energy consumer. IEA forecasts that by 2030, the global electricity demand from data centers will surpass 945TWh annually. That’s more than what Japan uses for an entire year. And Japan is the world’s third largest economy (or fourth, depending on some calculations).
Be strategic
The IEA even gives a tripod strategy to support the digital infrastructure construction and provide it with the needed power. It relies on a mix of renewable energy, natural gas, and nuclear. Each of them will have a different role in providing the overall balance.
Renewables should be mostly wind and solar and are expected to deliver half of the new demand growth through 2035. This means they should add about 450TWh generated energy. But.. there’s a catch. For that to happen, it will require enormous investments in grid modernization and energy storage.
Natural gas will continue to be a critical source of energy generation for the mid-term. Unlike renewables which can be sourced from nearly everywhere, natural gas is more regional. Thus, some countries will benefit from it more than others. Despite that, the IEA projects that natural gas will help provide 175TWh in additional capacity and it will serve as baseload buffer and help with critical peaks.
Finally, nuclear energy. It was supposed to be pushed away by green energy, but that won’t happen, at least not for the time being. In fact, small modular reactors (SMRs) are becoming popular and a good solution for locations where a lot of constant energy is needed, ie hyperscale data centers.
The IEA says that 20% of the planned data center projects around the world are facing potential delays because of electric grid constraints. And they are already happening. In the US and parts of Europe, there are 4- to 8-year backlogs for new grid tie-ins. There are severe supply chain bottlenecks as well – there is simply not enough equipment for essentials like transformers, gas turbines, switchgear etc. This leads to further delays in projects.
Finally, despite the latest efforts and changes in the data center construction markets, many of the projects are still concentrated in the usual countries. Nearly half of all US data centers are clustered in five regions, and it’s similar in Europe with five countries drawing the most attention.
AI can help
It’s easy to blame artificial intelligence for the main reason for the problems in the data center sector. But it can also help. The IEA points out a few ways that can be. The most obvious is with grid optimization. Advanced AI models can reduce outage durations by 30% to 50%, and can unlock an additional 175GW of latent transmission capacity without adding a single new line. AI will improve in real time the overall usage of resources not only in data centers, but in multiple industries using said facilities. It’s a modellable outcome which can help compound sizeable energy savings – as much as the entire consumption of Mexico.
What will happen is difficult to say. The IEA notes three potential directions. In the base case, the AI energy demand will reach 1200TWh by 2035. In the best case, it will be 960TWh, not because it will be used less, but because there would be widespread deployment of optimized hardware and software which will lower the overall consumption. And in the “lift-off” case, the demand will actually reach 1700TWh – a world where AI is everywhere and in everything.
The IEA also says there’s high volatility in these forecasts and everything can change. In order to get a good overall result, the agency recommends several priorities to be worked on immediately. They are to accelerate grid modernization, scale renewables and clean baseload power, and to improve storage and regional grid coordination. Also, incentivize AI deployment in energy systems, HVAC systems, and transportation. Finally, invest and accelerate R&D on AI, advanced materials, carbon capture, software-defined power management and more.