WSS: Demand profile for the sector remains strong and is driving investment and new opportunities
We had a slower publishing week due to the infra / STRUCTURE summit in Las Vegas. A big thanks from all of us here at Structure Research to those who helped make the event a success. Our sponsors, especially lead sponsor Citizens, were instrumental in getting the event from Toronto (where it was held since 2018) to Las Vegas for the first time and this will be our permanent home going forward. And of course, a big thanks to all the attendees who took time from their personal and professional schedules to participate. Next year will be bigger and better, and we hope to see you there. Registration will open early next year, so check in here for updates. We will likely open up after the PTC event in January 2025 as we position to be the 2H marquee event for data centres and hyperscale infrastructure.
The summit covered a lot of ground and AI was of course top of mind and at the centre of many discussions. Ai is not just forcing the sector to rethink how it build and deploys infrastructure, but shaping how operators devise strategy – planning, anticipating and positioning to meet the demand that is building and set to accelerate. Direct liquid-to-chip cooling systems are one of the newest technologies being implemented, and in the past week we saw Global Switch and Khazna Data Centers stand up infrastructure in their Hong Kong and UAE facilities.
Forward planning is increasingly crucial in an environment where demand is surging, but how AI is deployed is still not settled and can be unpredictable. Operators and investors agree that the demand is there and are acquiring the raw underlying resources in advance so that they are not caught without capacity and inventory. In APAC, PDG acquired 500MW of land and power in a number of its regional markets, while the PowerHouse and Chirisa JV acquired a site in Virginia for a 300MW build. This acquisition happened even as it is building out capacity for its anchor tenant, speaking to how fast and aggressive it thinks things will go. We are also seeing the hyperscalers plan further and further ahead. This was a big topic of discussion at our summit and we tale a look at some of the data points released by publicly listed energy companies that are seeing unprecedented demand and investing heavily in infrastructure to keep up.
The level and quality of demand that is out there is something most can agree on and conditions have improved over the last several quarters. Public cloud growth is starting to accelerate and AI has something to do with it. But the key point to keep in mind is that traditional public cloud infrastructure is still growing steadily and remains at the core of the sector’s growth. End users are buying more raw infrastructure capacity, adding new services and tools, and pushing footprints globally. Some of this involves AI, and running workloads on GPUs on public cloud platforms, but it is very early days and the impact on the overall growth trajectory is only starting to be felt. When this kicks in, the upside everyone is anticipating will start to be realized.
Not surprisingly, the opportunity that is out there is driving new company formation and strategic activity. In our monthly insights, we look at some of the recent new company formation, and there have been a few transactions motivated by the need to bring in resources for development and expansion. In the past week, Sixth Street acquired a stake in global operator EdgeConneX, Scala Data Centers raised funds for expansion, and we take a closer look in our monthly insights at some of the more noteworthy transactions of late.
Large-scale investments, needless to say, are also happening on the hyperscale side. AWS is set to invest $1.8b in Brazil for data centre infrastructure and Oracle Cloud is looking at investing $6.5b in Malaysia. We will have more details in the coming week on Google Cloud breaking ground and investing heavily in Malaysia and Thailand. Google Cloud also just broke ground on a new campus in South Carolina.
There were also plenty of developments on the cloud infrastructure side of the game. Oracle Cloud continues to push interoperability with its competition and partnered up with AWS. The last year has seen a gradual and subtle breaking down of the walled gardens dividing the public cloud platforms. The hated egress fees have become slightly (with an emphasis on slightly) more flexible and public clouds are responding to the demand for more multi-cloud usage by exploring these types of interoperability agreements. On the webscale side, DigitalOcean is pushing harder into GPUs and consolidated the Paperspace operation, while rolling out new offerings for NVIDIA-based GPUs. NVIDIA continues to be the growth engine behind GPUs, but the hyperscalers are looking to diversify and AWS and Intel co-invested in chip development based out of the new manufacturing plant being built in the Columbus, Ohio area.
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