Data center growth likely to undergo correction, analyst says

Another day, another data center.

The infrastructure that underpins so much of the modern tech industry is growing—though by how much is difficult to predict, managed service provider Ensono’s Chief Sustainability Officer and VP of Global Data Center Operations Jim Kozlowski told IT Brew.

“I’m more positive, even given the uncertainty [that] makes me uncomfortable,” Kozlowski said.

But he’s not sure the predictions that said data center growth will double are correct. To Kozlowski, the rate of growth is an open question; while he’s sure the industry will continue to see a robust increase in capacity and physical infrastructure, he’s less sure how fast that will happen.

Rising tide. Over the past year, data center growth has seen some hiccups along with spikes of growth. For the first half of 2024, according to a report from real estate services company CBRE, data center capacity increased by the entire capacity of Silicon Valley. More recently, disinvestment from companies like Microsoft has led to questions about the longterm health of the industry.

A number of factors complicate data center growth and construction. There’s the question of physical space and access, connectivity to power grids and energy resources, as well as finances. Concerns about sustainability have led some companies to turn to wood for construction.

And now, with executive branch tariffs affecting wide swaths of the manufacturing economy, there may be more hurdles.

“There’s a lot of concrete in data centers, which doesn’t need steel-reinforced rebar at all points, but a lot of it does,” Kozlowski said. “So, what impact is [a] 30%, or 50%, or pick your number, increase in the cost of steel, if that steel was imported for that manufacturer?”

That’s a wrap? All told, Kozlowski said, the factors at play indicate that there’s a correction coming.

“All those aspects mixed together will slow down reaching the peak of that curve that people have predicted over the last couple of years,” Kozlowski said.