WSS: Rising demand and the search for energy to support it takes the sector further into nuclear options
The past week saw a wide range of activity from across the Internet infrastructure sector. Data centre operators and hyperscale platforms continue to marshal resources for present day needs, and what is to come, and they are running into the hurdles presented by real world constraints. Alternative energy sources are top of mind and there were a number of developments in the past week around nuclear energy.
AWS was the first to really push in this direction, with the purchase earlier this year of the Talen Energy nuclear site in Pennsylvania, and Oracle also mentioned on its recent earnings call that it was exploring nuclear energy options. Microsoft and Google are now actively looking to do the same. Microsoft recently signed a 20-year PPA for nuclear power from Constellation Energy and Google executives recently went on record saying they are exploring this option as well. The reality of power constraints is pushing things forward in nuclear and the operating and development side of the game is becoming more active. Equinix recently partnered with Oklo to explore nuclear and a new outfit called Advanced Nuclear Advisors is working on the pre-development side and assembling resources and identifying sites for hyperscale data centre development. Not surprisingly, the focus on energy is top of mind for operators and they are hiring dedicated resources to focus on this area. CyrusOne was the latest to bring in a senior executive focused on energy, following Cologix a few months back, and AWS has a job listing out looking for a nuclear engineer to work on data centres.
Even as hyperscale looks to what is next and elevates the pace and intensity of its forward planning to anticipate AI, traditional cloud continues be the growth engine of the sector. Google Cloud made significant investments in two new markets in Southeast Asia – Thailand and Malaysia – and Microsoft is putting more resources into Europe and investing in Italy. Meanwhile, Equinix is looking to push further into a number of US markets, partnering with GIC and CPP Investments on a $15b joint venture. Equinix’s xScale program is looking to build out multiple campuses across the US with 100MW+ of capacity. It is looking to provide growth runway for traditional cloud infrastructure and create economies of scale, opportunity and efficiency for interconnection, while having the capacity for AI workloads and inferencing scenarios. Once AI starts to take off, and inferencing requirements climb, the xScale model should be a good fit. Expansions like this reflect the argument made at the recent infra / STRUCTURE summit in Las Vegas: traditional cloud is still the growth driver for the sector and GPU-based workloads are largely living within existing infrastructure environments, but things are expected to hit the next level sooner than later and the sector is scrambling to be ready. Hyperscalers and data centre operators are gathering resources that are finite and coming up against constraints, which is pushing an emphasis on pre-development and new business models, and alternative energy sources and locations.
The pace of hyperscale growth has opened the door to a new category we call edge-hyperscale. Hyperscale workloads in the 1-10MW range are gaining momentum and operators are seeing enough demand here that they are starting to de-emphasize traditional enterprise-oriented wholesale colocation. This is not necessarily widespread across the competitive landscape, but select operators, with the right portfolio and connectivity ecosystems, are moving in this direction given the demand and overall long-term opportunity.
With the sector pushing forward aggressively, it is not surprising that the strategic side has been correspondingly busy. A turning point for the sector is coming into full view and large IT infrastructure companies are thinking about how to deal with the AI wave, much as they considered how to address the public cloud challenge. With that in mind, Cisco is reported to be close to acquiring a stake in GPU cloud provider CoreWeave as it looks to stay in touch with the infrastructure value chain around GPU cloud delivery. Meanwhile, there were other notable strategic developments over the past few weeks. In the Middle East, Ooredoo Group secured funding to build out its data centre business, while DC BLOX and EcoDataCenter secured more funding as well. Overall, there was less M&A activity, though in Europe we saw new company formation (PolarDC) and the emergence of master-planned operators focused on the pre-development stage (Sepia Infrastructure).
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