What could drive data centre growth?

In the US, data centres are expected to reach 35GW by 2030 from 17GW in 2022.

As demand for data centres surges, investors could support the growth of the sector by exploring investment opportunities in sustainable energy, cooling and energy consumption, data centre operations, and power and connectivity services.

According to McKinsey's analysis, demand for data centres in the United States is expected to reach 35 gigawatts by 2030, up from 17 GW in 2022. This has led to increased investor interest in the sector, with over $48 billion worth of deals in 2021 and 87 deals worth $24 billion in the first half of 2022.

Data centres are typically owned and operated by large companies or co-location companies, with the latter leasing out space and providing network capacity, power, and cooling equipment. Investors are attracted to the steady, utility-like cash flows and risk-adjusted yields of data centres.

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However, there are potential limitations to this trend, such as higher interest rates, competition for potential acquisition targets, and pressure on operating margins from cloud vendors.

Despite these limitations, data centres still present opportunities for investors in sustainable energy. Data centres are big energy consumers, and investors can help them secure carbon-free energy supplies by signing power purchase agreements with suppliers of renewable energy or by investing in renewable-energy plants.

Efficient cooling is also crucial for a data centre's profitability, as it accounts for 40% of its energy consumption. Companies are developing technologies such as immersion cooling and artificial intelligence and machine learning to address these challenges, and investors can explore investment opportunities in this area.

Investors can also consider investing in data centre operations, such as hosting and infrastructure as a service (IaaS), and power and connectivity services.

McKinsey added that the demand for new data centres also opens investment opportunities in the fragmented prefabrication and modular sector and edge computing.