This article is part of:Centre for Regions, Trade and Geopolitics

• Data centres are proliferating rapidly, with demand driven by AI.
• They are not just digital infrastructure, but also high-value investment assets.
• Energy consumption, regulatory complexity and geopolitical tensions are potential obstacles to future growth in the sector.

If you’re reading this, the words on your screen have already travelled from a data centre halfway across the world through thousands of kilometres of fibre optic or undersea cables, in just a fraction of a second. Whether you're streaming a movie, using cloud storage or chatting with AI, your data is being stored, processed and delivered by vast, energy-intensive digital warehouses called data centres.

These unseen giants are the backbone of the internet and the digital economy – and their role is only growing. As the industry evolves to keep pace with a digital world that never sleeps, demand for data centres is surging, bringing with it added environmental and regulatory challenges.

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What are data centres?

Data centres are physical facilities that house the computer servers responsible for storing, processing and transmitting the data we use every day. Think of them as the digital equivalent of warehouses, but instead of assembling and storing products, they manage and deliver data.

These facilities contain thousands of high-powered machines, kept cool and running 24/7. Some can be as small as a janitor’s closet; many are now as big as a shopping mall. The largest ones, hyperscale data centres, can cover the equivalent of 13 full-size football pitches, every inch filled with servers supporting entire cloud platforms used by millions of people at a time.

Historically, most organizations used to store their data on site, in air-conditioned server rooms tucked away inside their buildings. But as digital needs grew, and reliability, security and scale became more important, businesses began shifting to specialized, cheaper off-site facilities designed to handle far greater volumes of data.

The global thirst for data

Data centres are expanding at an unprecedented pace, powered by the explosive growth of the digital economy. Today, the global data centre industry is estimated to be worth $242.72 billion and is projected to more than double, to over $584 billion, by 2032. Tech giants like Amazon, Google, Microsoft and Meta are leading the charge, with the number of hyperscale data centres doubling roughly every five years.

These facilities have been estimated to handle over 95% of the world’s internet traffic, ensuring real-time connectivity for billions of users. They’ve also become critical infrastructure not only for economic competitiveness but for national security, with governments increasingly prioritizing data sovereignty and control.

And while data centres have been growing globally, the majority remain concentrated in developed economies. The US alone accounts for over 45% of the world’s data centres, with a significant share clustered just outside Washington Dulles Airport in Northern Virginia - an area often referred to as “Data Center Alley”. Germany and the United Kingdom follow as major hubs.

But this landscape is starting to shift as emerging markets such as India, Brazil, Kenya, the UAE and Singapore ramp up investments to position themselves as regional hubs.

Driving this surge is the rise of AI, which demands far more computing power than traditional applications. Training large AI models like GPT-4 can consume over 1.7 million kilowatt-hours of electricity, roughly the average annual energy use of 160 US homes, which requires thousands of high-performance GPUs running for weeks on end.

In response, companies are building AI-specific supercomputing data centres – such as Amazon’s Project Rainier and Meta’s $10 billion AI hub in Louisiana – to meet the massive computational needs of next-generation AI systems. With increasing cloud adoption, automation, edge computing and AI all converging, demand for powerful, intelligent and sustainable data centres is only set to accelerate.

The data centre gold rush

As the digital economy continues growing, data centres have become a hot commodity in global investment circles. Around the world, economies are racing to attract greenfield data centre projects, viewing them as bedrocks for future economic growth. From Singapore and Saudi Arabia to Ireland and Kenya, governments are positioning themselves as prime destinations for data centre foreign direct investment (FDI), offering tax incentives, fast-track permitting and dedicated infrastructure zones.

Why the rush? Data centres are not just digital infrastructure, they’re high-value assets that enable innovation ecosystems, create high-skilled jobs and improve digital resilience. Hosting a regional or hyperscale data centres can help an economy attract further investment in complementary industries, such as cloud services, fintech, e-commerce and AI, boosting competitiveness across sectors. For many economies, these digital infrastructure projects are seen as a pillar of their national digital transformation visions. Growing investment in the digital economy brings not only capital, but technology, know-how and jobs.

Challenges to expansion

Despite booming demand and increasing global interest in attracting data centre investment, the sector faces a growing set of regulatory, environmental and infrastructure-related challenges that threaten to slow its expansion.

One of the most urgent concerns is energy consumption. Data centres currently account for an estimated 1-1.5% of global electricity use, and that figure is expected to rise sharply with the growing adoption of AI and cloud services. While hyperscale operators are investing in renewable energy and innovative cooling technologies (such as liquid cooling and water-free systems), there’s mounting pressure from regulators and local governments to ensure long-term sustainability and carbon neutrality. Some markets have even paused new data centre approvals due to grid stress or environmental concerns.

Another major issue is regulatory complexity. Rising data sovereignty requirements and cross-border data flow restrictions, such as those under the EU’s GDPR or China’s Cybersecurity Law, create fragmented regulatory frameworks. They also force companies to store and process data within national borders, driving up costs and creating data silos, limiting their ability to use global data centres that may be more efficient or cheaper.

At the same time, data centre investment could be slowed by layers of bureaucracy – from burdensome licensing and permitting delays to stringent investment screening procedures and unpredictable foreign investment rules – further complicating the industry’s growth.

The data centre industry is also increasingly caught in the crossfire of geopolitical trade tension. Availability and access to critical components like superconductors, fibre optics and advanced computing hardware has become a strategic trade and national security issue, shaped by export controls, industrial policy and supply chain disruptions.

So while the demand for data centres is global and growing, the barriers to building and operating them at scale are becoming more complex. This requires smart, coordinated policy responses to ensure economies can capture their full potential.

Join the conversation

Our long-standing experience as a platform for public-private collaboration has taught us that progress on complex global challenges requires the right people around the table. That’s why we’re bringing together thought leaders from across the data centre value chain, alongside policy-makers and investment agencies, to form a new community of purpose.

The goal is to establish a space where public- and private-sector stakeholders can collaborate on the trade, investment and regulatory issues shaping the future of digital infrastructure. This community can help identify key barriers, share practical solutions and shape the enabling environment needed to support sustainable data centre growth.

If you’re involved in the data centre space – whether in technology, infrastructure, policy or investment – we’d love to connect. Join the conversation and help shape what comes next.