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Colocation data center market set to reach $65.2 billion by 2027, Omdia research says

Colocation data center market set to reach $65.2 billion by 2027, Omdia research says

New research from Omdia reveals that the data center market has a heightened awareness of practical applications for AI that promise to improve productivity and lower costs.

Colocation businesses are expected to be riding this wave of new AI growth. This includes both multi-tenant and single tenant data center providers, to which some have adapted their data center designs to enable higher rack power density.

The company says that the power consumption of servers configured for AI training is akin to high-performance computing (HPC) clusters for scientific research.

Commenting on the new research, Alan Howard, principal analyst at Omdia, says: “The colocation providers able to provide the highest rack densities and access to liquid cooling will now have the upper hand in the market for data center space.”

Research from Omdia projects strong growth in the colocation market, and it’s likely the proliferation of AI hardware will be an addition to the growth. The colocation industry is also expected to reach $65.2 billion in 2027, with a five year growth CAGR of 9.4%, according to Omdia’s colocation services tracker.

Of the top providers, Equinix, Digital Realty and NTT Global Data Centers (NTT GDC) remain top three, operating over 700 data centers and over 100 construction projects between them. According to Omdia’s data center tracker, these three companies represent 33% of the total 2022 revenue of $41.6 billion.

India’s research also identifies that not all data centers can handle AI or HPC equipment, but these companies and numerous other noteworthy colocation service providers have been anticipating this emerging growth trend.

India notes that data centers built over the last couple years, and many of those under construction, have been designed and architected to accommodate these high-power density equipment racks. These data center design and architecture properties include high-density power distribution management and precision cooling.

The research also found that in some cases, colocation customers require direct to chip liquid cooling which requires special data center plumbing designs to provide customers access to a liquid cooling loop, or the option to install immersion cooling tanks.

“Achieving these advanced data center operating characteristics are not for the faint of heart, or those companies with an aversion to high capital expenditures (capex),” Howard continues.

“Colocation companies like Equinix, Digital Realty, NTT GDC, Flexential, DataBank, Compass, Aligned, Iron Mountain, and a host of others are in the business of taking that capital risk to build data centers so that enterprises and cloud service providers don’t have to.”

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