By Tech Brew Staff
less than 3 min read
Definition:
A data center is a physical room, building, or facility that houses the various servers, storage drives, network hardware, and other IT infrastructure that runs applications, hosts websites, and performs other computing tasks. Data centers can be on-premises for the exclusive use of one company, or operated by a cloud service provider that in turn provides computing capacity for customer companies.
Data center construction boomed during the first dot-com bubble, then subsequently crashed when that bubble popped. The rise of cloud computing in the 2000s—especially the founding of Amazon Web Services in 2006—led to a new model of data centers in which computing capacity was available on demand online with flexible pricing.
The AI bump
More recently, the rise of compute-intensive generative AI has led to a massive demand for new data centers. These AI-specific data centers involve GPUs that use significantly more power than other servers. Big Tech companies like Microsoft, Google, Meta, and Amazon are sinking tens of billions of dollars each on new data center infrastructure to train these huge new models. The surge of new data centers is consuming massive amounts of energy and threatening to overwhelm power grids. The big cloud providers—companies like Amazon, Microsoft, and to a lesser extent, Google—have now turned to selling generative AI services on top of their clouds.
A Boston Consulting Group report published in January 2025 projects that global demand for data center power will grow at a compound annual rate of 16% from 2023 to 2028—a third faster than in the preceding three years. There are also worries that this big data center rush could prove to be an investment bubble.
