· Data center capital expenditure will surpass $500 billion in 2027
· Spending on accelerated servers will increase faster than spending on general purpose servers
· Limited supply of the chips needed for accelerated servers could delay some spending
A new forecast from Dell’Oro Group predicted data center capital expenditure will double over the coming years, jumping from $250 billion in 2022 to more than half a trillion dollars in 2027.
Silverlinings had a chat with Baron Fung about what’s in those numbers. He said data center capital expenditure includes servers; storage systems; networking equipment such as switches, routers, and transport systems; data center physical infrastructure; other data center facilities; and supply chain costs. Growth in the near term is expected to slow – from 17% year on year in 2022 to just 6% year on year in 2023. But the upward trajectory will continue through at least 2027.
Accelerated servers – that is, high performance servers – will see significant growth over this forecast period. That’s thanks to the boom in demand for artificial intelligence (AI). But Fung said while capital expenditure on these servers will grow nearly 5x faster than spending on general purpose servers, accelerated gear will still make up a minority of data center infrastructure.
“Long-term data center capex trends will be influenced by AI. Servers will have the biggest positive influence compared to other technology areas. We expect more servers will be ‘accelerated’ in the future, with the inclusion of accelerators such as GPUs, FPGAs and custom processors. These accelerated servers will cost a lot more than general-purpose servers, which are servers without accelerators. However, these accelerated servers still have a low share compared to that to general purpose servers today,” he said.
Fung added: “Many of the hyperscalers will be investing more on accelerated system this year. I forecast the shortage of AI specific chips such as GPUs delaying some of those capex plans.”
As Fung previously noted, data center operators can't just drop in accelerated servers with no other work. They'll also need to upgrade their networking and other physical infrastructure. More on that, here.