There’s a chip war going on. Semiconductor manufacturers continue to release increasingly powerful processors designed to manage new types of workloads, including artificial intelligence (AI) and machine learning (ML). Frequent headlines about this ‘semiconductor arms race’ have understandably made some investors concerned about whether the facilities supporting these servers—data centers— will become obsolete.
In an effort to address these concerns, we’ve gathered perspective from four of our data center experts around the world. As we’ve written before, innovation will indeed impact data centers, but we believe these risks are both limited and manageable. In fact, the global economy’s increasing reliance on data has only made these facilities more attractive real estate investments.
- IT infrastructure has always evolved rapidly, and even data centers built 25+ years ago have not been rendered obsolete.
- Because the purpose of a data center is to power, cool, and connect IT equipment, its fundamental value is driven by power capacity and network connectivity—factors not likely to change unless new processing technologies such as quantum and biological computing are widely commercialized, and that is still decades away.
- There are innovations that affect data center design—including increasing density and evolving approaches to sustainability. But those won’t make existing data centers obsolete.
- Leading data center developers build configurability into their facilities to support innovations like higher density and new approaches to sustainability.
- Even if the data center wasn’t designed to be configurable, retrofitting an existing facility to support innovations is a much more likely course of action than decommissioning the data center entirely—in no small part because demand for data center capacity far outstrips supply. Old and new will continue to coexist.
Rich Miller, Editor at Data Center Frontier, offers an illuminating anecdote:
“On Oct. 22, 2009, CNBC personality Jim Cramer warned his legions of viewers that the data center industry was ready for a fall. ‘Get out of the data center stocks,’ Cramer told viewers. ‘I think the data center industry is in decline. I see an industry that’s about to be brought low by new technology, so I think you should sell, sell, sell.’
Short version: Cramer’s ‘Sell, Sell, Sell’ was Wrong, Wrong, Wrong. Investors who followed his advice missed out on a historic rally in data center stocks, with Equinix gaining 88% in value during that period, and looking like a laggard compared to industry rivals Terremark (up 172%), NaviSite (up 151%), Rackspace (up 139%) and Savvis (up 122%). Digital Realty, DuPont Fabros and Akamai were all between 50-65% higher.
Cramer seemingly didn’t understand the historic relationship between faster chips and data center demand. He noted strong sales for Intel’s new family of Nehalem DP processors, one of which can ‘take the place of eight to nine older- generation servers.’ Cramer did some math and concluded that data centers will soon be seven-eighths empty.
Nehalem was the latest in a series of regular technology updates from Intel, each of which introduced faster and more powerful processors, and none of which emptied out data centers. Here, history could have been an aid to Cramer. It would have been simple to compare the launch of faster Intel chips and data center growth to test his thesis.
There are innovations that affect data center design, but they won't make existing data centers obsolete
Rapid evolution in IT infrastructure has not rendered data centers obsolete, in part because the value of a data center is in its fundamental ability to power, cool, and connect IT equipment. However, that’s not to say data centers haven’t evolved. They have. Rising density, for example, has led to innovations in both power and cooling infrastructure. Cooling infrastructure has also evolved as approaches to sustainability have changed. But none of these innovations have made existing data centers—even facilities built 25+ years ago—obsolete.
Rising density does affect data center design, but doesn't make existing data centers obsolete
When the components in a dense integrated circuit double every two years, the practical effect is increased performance—the ability for a given chip, or server, to do more compute work or store more data. All else equal, refreshing IT equipment with higher- performance gear increases the amount of work a set of servers in a rack can do, and since ‘work’ is moving electrons around a circuit board and therefore directly proportional to power input, it increases the power input to a given server rack (i.e., density).
Average density per rack is rising
Average server rack density has been rising steadily. And while the average server deployments remain under 10 kW per rack, some more recent deployments are reaching five times that level. Applications such as artificial intelligence run at those much higher densities, as they require more power-intensive computations from servers and storage systems than traditional workloads.
Density affects data center infrastructure in two ways: power and cooling.
Density affects power infrastructure
Data center density is a measure of how much power is delivered to each server rack. From a pure power perspective (ignoring cooling for a moment), a data center’s ability to support higher density deployments depends on two factors: the amount of utility power capacity it has, and the capacity of its existing power infrastructure.
If there is unused utility power and infrastructure, the data center can support tenants’ higher density deployments with minimal modifications. In many cases, a data center may have additional utility power available but needs to deploy additional power infrastructure such as transformers and electrical backup systems to support increased density. If there is no extra utility power capacity, then supporting higher density deployments would require either bringing more utility power to the facility or reducing the number of servers to keep the total power consumption the same even as each server consumes more power.
In any case, the facility is not rendered obsolete. Actually, the fact that utility power is an increasingly scarce resource, especially in primary data center markets, is one reason existing data centers have a distinct advantage over new construction.
Density also affects cooling infrastructure
In reality, we can’t ignore cooling, and because increasing density means more power in, it also means more heat out. So, for most data centers the bigger challenge associated with rising density is cooling (or more accurately, heat removal). Each cooling technology has limits on how much heat it can remove from the environment, and technologies have evolved over the years to remove more heat.
In the early 2000s, most data centers were designed with air-conditioning-like systems that cooled the entire data hall—not very efficient, but sufficient for rack densities under 2 kW. Then many data centers adopted new technologies where heat emitted from servers is drawn away by fans and then cooled with water or a refrigerant—much more efficient and effective for rack densities up to 20 kW or so.
Supporting significantly higher densities, the likes of which we see with AI workloads, for example, will likely require either liquid cooling to the rack or immersion cooling. In liquid cooling to the rack, a cooling medium (typically chilled water) is piped to the server racks and then utilized by heat exchangers in the row or mounted on the server racks; or piped into cooling plates attached to servers or into plates and pipes integrated into the computing equipment itself. Immersion cooling is a very different technology; specially designed servers are fully immersed in a cooled, nonconductive refrigerant, although the building’s heat-rejection equipment remains fairly similar for all cooling strategies.
New approaches to sustainability do affect data center design, but don't make existing data centers obsolete
Besides density innovations that demand new approaches to cooling, sustainability concerns also impact the choice of cooling systems. For a long time, sustainability in the data center meant optimizing energy efficiency, as measured by Power Usage Effectiveness (PUE). More recently, data center operators and tenants have added measures of water efficiency to their ESG goals.
There are tradeoffs between energy efficiency and water efficiency. All else equal, water-based evaporative cooling systems are the most energy efficient, but more water intensive. Closed-loop air-cooled chillers are the most water efficient, but more energy intensive. Especially in water-contrained markets and markets where renewable energy is readily available, leading data center developers are increasingly relying on air-cooled chillers.
A data center designed for a water-based evaporative cooling system can be retrofitted to support closed- loop air-cooled chillers. Even where the operator doesn’t retrofit the facility, most manage a mixed portfolio of both water-based evaporative cooling systems and closed-loop air-cooled chillers. In other words, evaporatively cooled data centers are not obsolete—especially considering the ESG implications of decommissioning an entire evaporatively cooled facility in favor of a new facility that uses a closed loop chiller.
A revolution in how computers work will dramatically change data center design, but it's decades away
As long as computers in the data center rely on electrons, the data center fundamentals of power, cooling, and connectivity will remain. (Even quantum computing depends on those same fundamentals, though its widespread commercialization would require significant changes to data center design, in large part because quantum computers must be kept very cold.) There is one innovation that could render existing data centers obsolete: computers that rely on biological media rather than electrons. But biological computers only exist in the simplest form today, and commercial viability—much less widespread adoption—is likely decades away.
Leading data center developers design for configurability
Because there are innovations—like rising density and new approaches to sustainability—that affect optimal data center design, leading data center developers build configurability into their facilities to support innovation without rendering existing facilities obsolete. So even if higher density requires changes to how a data hall is laid out or cooled, those changes can be made within the existing data center—ensuring its usability for many years to come.
Existing facilities can be (and are often) retrofitted to support innovations
Even if a data center wasn’t designed to be configurable, retrofitting it to support innovations like higher density and a focus on water efficiency is a much more likely course of action than decommissioning the data center entirely—in no small part because the industry needs all the capacity it can get. (The average vacancy rate of the top 10 North American data center markets is 2.88% according to datacenterHawk, and “demand is still outpacing providers' ability to deliver new capacity.”)
Old and new will continue to coexist
Data center developers are already innovating the design of new facilities to support higher density and evolving approaches to sustainability. For example, Meta, which both leases and develops its own facilities, recently announced that its new generation of data centers will be liquid cooled, to support AI workloads at scale.
But even as more data centers run AI or other workloads that require higher density, old workloads will continue to run, and need existing data centers to support them.
IT infrastructure has always evolved rapidly, and even data centers built 25+ years ago have not been rendered obsolete. Because the purpose of a data center is to power, cool, and connect IT equipment, its fundamental value is driven by power capacity and network connectivity. These factors are not likely to change unless new processing technologies such as quantum and biological computing are widely commercialized, and that is still decades away.
Innovations that do affect data center design, including increasing density and evolving approaches to sustainability, won’t make existing data centers obsolete. That’s because leading data center developers build configurability into their facilities to support innovations. And even data centers not designed to be configurable can be retrofitted— much more likely than decommissioning, especially as industry demand for data center capacity far outstrips supply.
So, will big advancements in technology—like AI—render existing data centers obsolete? Quite the opposite; more likely, technological advancements will further increase the value of existing assets as they drive increased demand for data center capacity. For Public Distribution in the United States. For Institutional, Professional, Qualified, and/or Wholesale Investor Use Only in other Permitted
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