How Data Centre Investment Just Overtook Oil

Global investment now favours data centres over new oil supplies, reflecting the scale of electricity demand created by AI and the increasing importance of digital infrastructure to national economies.

Data Spending Overtakes Oil For The First Time

The International Energy Agency has reported that global spending on data centres will reach around 580 billion US dollars this year, overtaking the 540 billion dollars allocated to new oil supply projects. The agency described this comparison as a clear marker of how modern economies have become anchored in digital services, cloud computing and large-scale AI models, all of which require vast physical infrastructure and reliable electricity.

Usage To Triple By 2035

Electricity use from data centres is projected to approximately triple by 2035. AI systems are a major driver, and the IEA expects half of all demand growth to take place in the United States, with Europe and China accounting for most of the remainder. Many new facilities are located near existing clusters around large cities, with around half of the sites currently in development designed to deliver at least 200 megawatts.

The concentration of this growth is, therefore, already testing the limits of energy systems. Grid connection queues for new facilities continue to lengthen, and in several regions networks are so congested that new requests have been paused. Shortages of transformers, cables and other grid components are adding to delays. These issues highlight how the rise of AI is now tightly linked to national energy planning, rather than being a purely digital challenge.

Electricity Systems Under Growing Pressure

The IEA describes the global system as entering an “Age of Electricity”, with most new energy demand coming through power grids rather than fossil fuels. Investment in electricity generation has increased significantly since 2015, yet grid investment has not kept pace. New solar and wind capacity is being deployed at record levels, but the lines and substations needed to carry this electricity to major users are often slowed by planning processes and supply chain constraints.

Cooling demand is creating additional pressure. For example, rising temperatures and rising incomes in many regions are driving higher peak electricity loads from air conditioning. These peaks often coincide with the load patterns of data centres, electric vehicles and electrified heating. As a result, grids are increasingly stretched while they await new capacity and greater flexibility from storage technologies.

In several established markets, energy regulators have warned that large electricity users may need to be subject to stricter technical rules or new pricing structures to ensure network stability. Data centres are therefore becoming part of broader energy security discussions, particularly in regions where supply margins are tightening.

Power Shortages Slow Construction Across EMEA

It’s also the case now that power constraints are directly affecting the pace of new construction across Europe, the Middle East and Africa. For example, new research from Savills shows that only around 850 megawatts of new power capacity for data centres has been delivered across the region so far this year, representing an eleven per cent decline compared with the same period last year. New take-up has also slowed to approximately 845 megawatts, roughly half of 2024’s level.

This slowdown is not driven by falling demand. In fact, total contracted power capacity has risen to almost 14,500 megawatts, up by twelve per cent year-on-year. Also, occupancy rates have increased to ninety-one per cent, and around a quarter of new take-up is now pre-let. These figures illustrate that operators are securing power well ahead of time because there is no guarantee that future capacity will be available when needed.

Property advisory firm Savills found that established hubs continued to expand over the past year, including France, Germany, the UK and Ireland. Strong growth was also recorded in emerging markets such as Portugal, Saudi Arabia, Spain, the UAE and Sweden, where land and power availability are more accessible. This trend suggests that some operators are shifting attention to secondary and tertiary locations that offer fewer bottlenecks and more flexible permitting.

The Effects of Cost Inflation

It seems that cost inflation remains a significant factor. For example, across EMEA, data centre build costs now range between roughly 7.3 million and 13.3 million US dollars per megawatt of IT load. It seems that some cities have even experienced double-digit annual increases in land prices, labour and equipment. The result is that these rising costs are lengthening project timelines and prompting developers to form closer relationships with suppliers to secure key components earlier.

Also, electricity consumption forecasts continue to add urgency. For example, one well-known industry analysis last year suggested that up to forty per cent of data centres could face power availability constraints by 2027, and that total electricity consumption for AI-optimised servers could reach around 500 terawatt hours. This would represent more than two and a half times the level recorded in 2023.

Superconductors Move Into Data Centre Design

While grid upgrades are essential, many of the most immediate challenges are emerging inside existing data centre campuses. For example, as AI systems become more computationally intensive, rack-level power has risen from tens of kilowatts to around 200 kilowatts in just a few years. Some operators are now planning for 600 kilowatts per rack, and there is growing discussion of multi-megawatt rack architectures.

A US-based engineering company, backed by several major technology investors including Microsoft, has now adapted high temperature superconducting cables for use within data centres. The firm’s first commercial system is designed to deliver three megawatts of low voltage power through superconducting cables cooled with liquid nitrogen to approximately minus 196 degrees Celsius. This cooling allows the material to carry electricity with zero loss, which in turn supports far higher power density.

The company reports that its cables require around twenty times less physical space than equivalent copper cables and can deliver power roughly five times farther within a campus. A demonstration installation has already been completed at a simulated facility, and pilot deployments at live data centres are expected next year ahead of a planned commercial launch in 2027. These technologies do not replace the need for additional grid capacity, but they allow operators to make better use of limited on-site power and cooling infrastructure.

Data Centres And AI Companies

For data centre operators, the expansion in investment highlights both opportunity and risk. For example, facilities with dependable power connections, competitive energy prices and space for expansion can attract long-term demand from cloud providers and AI companies. At the same time, rising construction costs, lengthy permitting and potential regulatory intervention make project planning more complex. There is increasing attention on how much electricity AI infrastructure consumes, which may influence approval processes in some regions.

It seems that AI companies now face equally important considerations. Access to high-density, well-powered infrastructure directly shapes the pace at which new models can be trained and deployed. Delays in securing suitable hosting capacity can slow research progress or increase operational costs. There is also growing pressure for AI to run on renewable energy, which means the location of data centres and the structure of power contracts matter more than ever.

Governments, Economies And Businesses

Governments now have to balance national competitiveness with energy security and climate commitments. Data centres underpin cloud services, logistics, digital payments and AI-driven innovation, yet they also place significant demands on power networks. This means that policymakers must decide where new facilities can be built, how grid upgrades should be prioritised and how to maintain public support when large projects are proposed near urban areas.

Economically, the sector supports construction, engineering, manufacturing and digital roles. The long-term nature of data centre contracts also encourages investment in renewable energy, battery storage and potentially small modular nuclear reactors, which several countries are exploring as a source of stable low-carbon power for high-demand sites.

For ordinary businesses using cloud and colocation services, the main effects are likely to be reliability, availability and cost. Capacity constraints may lead to higher hosting costs in busy regions, while areas with strong renewable resources and efficient planning may become more attractive for new deployments.

Investors and Infrastructure Funds Increasing

Another relevant trend here is that investors and infrastructure funds continue to increase their exposure to the sector. For example, since 2021, around eighty to ninety per cent of the value of closed data centre deals has involved private equity, infrastructure funds or real estate investors, compared with half in 2020. This reflects confidence in the long-term demand for digital infrastructure but also raises questions about concentration of ownership in assets that underpin national digital resilience.

Challenges And Criticisms

The scale of AI-related electricity use has raised many questions about environmental sustainability, especially where data centres draw power from grids still reliant on fossil fuels. Concerns have been raised about water consumption for cooling, land use in crowded urban regions and the impact of construction on local communities.

Energy regulators have also highlighted system risks linked to large power users. For example, data centres can influence grid stability if they ramp up unexpectedly or disconnect suddenly, prompting discussions about new standards or pricing structures. There are wider equity concerns too, as global statistics show that hundreds of millions of people still lack basic access to electricity while trillions of dollars flow into advanced digital infrastructure.

What Does This Mean For Your Business?

The trends here show a sector that’s expanding rapidly while running up against some clear structural limits. Investment is rising because demand is strong and immediate, yet the electricity needed for large-scale AI is difficult to deliver at the pace operators require. This creates a landscape where data centres are becoming essential to economic performance, but their growth is constrained by the slow evolution of energy infrastructure.

Operators now depend far more on securing reliable power than on adding floorspace or equipment. This means that sites with firm grid connections and competitive energy costs will be best placed to meet rising AI demand, while regions with slow planning processes or congested networks risk falling behind. AI companies face similar pressures because training and running advanced models depend on reliable access to powerful, energy-intensive processing systems. Delays caused by grid bottlenecks or supply chain issues can slow deployment and raise operating costs.

Also, governments must now balance digital competitiveness with energy security and climate targets. Data centres support cloud services, logistics, payments and AI innovation, so the ability to host them is becoming a strategic priority. Grid upgrades, renewable investment and more efficient permitting processes will be required if countries want to remain competitive. This matters directly to UK businesses, which rely on stable cloud services and cost-effective data processing. Rising pressure on electricity networks could influence the reliability and price of digital services across the economy.

It seems that investors are continuing to increase their involvement because long-term demand remains strong, although greater private ownership of strategic infrastructure raises questions about affordability and resilience. Meanwhile, environmental concerns around electricity use, water consumption and land availability remain under close scrutiny. These issues highlight the importance of ensuring that rapid AI and cloud expansion aligns with national climate goals and local community interests.

The overall picture, therefore, appears to be that of a sector that will continue to grow but will be shaped most of all by the availability, cost and cleanliness of electricity. The choices made now on grid investment and energy policy will likely define how quickly AI infrastructure can expand and how the associated benefits are shared across economies and industries.