The development of interest in generative artificial intelligence has resulted in an arms race to develop the technology, which will require many high-density data centers as well as much more electricity to power them. Goldman Sachs Research forecasts global power demand from data centers will increase 50% by 2027 and by as much as 165% by the end of the decade, writes James Schneider, a senior equity research analyst covering US telecom, digital infrastructure, & IT services, in the team’s report.
Recent Chinese developments, mainly the AI model known as DeepSeek, have raised concerns about the returns on current & projected AI investment. Still, several questions remain about DeepSeek’s training, infrastructure, & ability to major. “In the long run, if we see efficiency driving lower capex levels, this would navigate the risk of long-term market oversupply we see in 2027 and beyond – which we think is an important consideration that could drive more durability and less cyclicality in the data center market,” says Schneider. On the demand side for data centers, large “hyperscale” cloud providers & other corporations are building large language models capable of natural language processing & understanding. Using power-intensive processors, these models must be trained on huge amounts of information.
On the supply side, hyperscale cloud companies, data center operators, & asset managers are deploying large amounts of capital to build new high-capacity data centers. Taken together, Goldman Sachs Research forecasts that the balance of data center supply & demand will tighten in the coming years. The occupancy rate for this network is projected to increase from around 85% in 2023 to a potential peak of more than 95% in late 2026. That will likely be followed by a moderation starting in 2027, as more data centers come online & AI-driven demand growth slows.
How much power will data centers require for AI?
At present, Goldman Sachs Research estimates the power usage by the global data center market to be around 55 gigawatts (GW). This is comprised of cloud computing workloads (54%), traditional workloads for typical business functions such as email or storage (32%), & AI (14%). By modeling future demand for each of these workload types, our analysts project power demand will reach 84 GW by 2027, with AI growing to 27% of the overall market, cloud dropping to 50%, and traditional workloads falling to 23%.
This baseline scenario could, however, be affected by a deceleration in usage by AI — for example, if the transition to AI-driven work and AI monetization doesn’t develop as quickly as anticipated. In such muted scenarios, demand could diverge from the baseline estimate by 9-13 GW.
The global landscape of data center supply
The current global market capacity of data centers is approximately 59 GW. Roughly 60% of this capacity is provided by hyperscale cloud providers & third-party wholesale data center operators. The remaining belongs to more traditional corporate & telecom-owned data centers. The AI-dedicated data center is an rising class of infrastructure. Although very few exist so far, they’re designed for the unique properties of AI workloads high absolute power requirements, higher power density racks, & the additional data center hardware that comes with it. They’re usually owned by hyperscalers or wholesale operators.
Regionally, Asia Pacific & North America have the most data center power and square footage online today most notably in regions such as Northern Virginia, Beijing, Shanghai, & the San Francisco Bay Area. These places have high computing & data traffic as well as robust corporate campus demand.
How data center supply is rising around the world
Goldman Sachs Research estimates that there will be around 122 GW of data center capacity online by the end of 2030. The mix of this capacity is expected to skew even further towards hyperscalers & wholesale operators (70% versus 60% today). Although Asia Pacific has added the most supply over the past ten years by a wide margin, North America has the most scheduled capacity coming online over the next five yearsGiven the higher processing workloads demanded by AI, the density of power use in data centers is likely to grow as well, from 162 kilowatts (kW) per square foot to 176 kW per square foot in 2027.
Power demand from data centers will require additional utility investment
As data centers contribute to a growing need for power, the electric grid will require significant investment. Goldman Sachs Research estimates that about $720 billion of grid spending through 2030 may be needed. “These transmission projects can take several years to permit, and then several more to build, creating another potential bottleneck for data center growth if the regions are not proactive about this given the lead time,” Schneider says. In Europe too, a data center-led surge in power demand is underway, after 15 years of decline in the power sector. Having surveyed utilities across the continent, Goldman Sachs Research found that the number of connection requests received by power distribution operators has risen exponentially over the past couple of years, mostly driven by data centers.
“We estimate a potential 10-15% boost to Europe’s power demand, over the coming 10-15 years,” Alberto Gandolfi, head of the pan-European utilities team for Goldman Sachs Research, writes in a separate report. Goldman Sachs Research estimates a data center pipeline for Europe amounting to about 170 GW, equivalent to about one-third of the region’s power consumption.“It is unclear at this point whether DeepSeek would have a positive or negative impact on the ‘data center bull case thesis’ for Europe,” Gandolfi writes in another note. “Yet we stress that around 35-40% of a hyperscaler’s energy consumption is from cooling, which would be similar across technologies.”
