US Data Center Power Capacity to Nearly Double by 2027, Fueled by Demand for High-Performance Computing and AI - Morgan Stanley Report
In a recent note from Morgan Stanley, it was revealed that U.S. data center power capacity is set to almost double by 2027, driven by the increasing need for high-performance computing (HPC) to support Generative AI (GenAI). The investment bank's research projects a significant rise in U.S. data center power from 40 GW in 2024 to 79 GW by 2027, primarily due to the growing requirements of AI technologies.
The bank's projections are based on a bottom-up model that calculates power demand using projected volumes of GPUs and custom silicon. Globally, Morgan Stanley predicts that power usage for GenAI will surge from 68 TWh in 2024 to 378 TWh by 2027, impacting total global data center power usage, which is expected to increase from 443 TWh in 2024 to 877 TWh by 2027.
Furthermore, the growth of the data center market is also reflected in the asset-backed securities (ABS) market. Morgan Stanley explains that data center ABS issuance is on track to reach a record $8 billion in 2024, bringing the total outstanding to $25 billion, up 37% year-over-year. By 2027, the ABS market could potentially reach $49 billion if the current trend persists, driven by more operators accessing this funding source and a growing investor base.
The investment bank anticipates that much of the data center expansion will involve new builds, with costs ranging between $30-$34 million per MW for full setups, or $8-$12 million per MW excluding GPUs and servers. However, they note that the time required to bring new data centers online is increasing, especially in regions like California where projects now take up to 125 months. This underscores the importance of retrofitting existing data centers, such as those used for bitcoin mining, to meet the immediate demand for AI and HPC data processing.
In conclusion, the significant growth in data center power capacity and usage driven by the demand for high-performance computing and AI technologies will have profound implications for the global data center market, asset-backed securities market, and investors. It is crucial for individuals to stay informed about these trends as they can impact investment opportunities, financial markets, and the overall economy.