The data center industry is ever-evolving, but in the last few years, the change has been fast and furious with the explosion of Artificial Intelligence (AI). If AI compute scaling maintains its current growth trajectory, GPU clusters will surge in size from 100K+ to 1M+ clusters, reaching gigawatt scale before 2030. This growth has left data center providers with a long to-do list of updates and upgrades to ensure they’re well-positioned to manage the current – and next – wave of innovation.

January ushers in another year of change for the industry – some we know and some we can predict. With a front-row seat to the evolution of data centers, both from a strategic and financial lens, here’s some expected industry shifts we foresee in 2025:

Data center designs will be denser

AI and GPU clusters call for never-before-seen power requirements. The “modern data center” must keep up by becoming larger, denser, and more advanced. In the coming 5 to 10 years, forward-thinking developers will significantly upsize their standing facilities and campuses. In fact, to correspond with the 1 million+ projected GPU clusters and to remain innovative in the market, today’s data center campuses must expand from roughly 100 – 300 megawatts to gigawatt levels.

In 2025, developers will conceptualize and advance designs that meet the requirements of the future. Data centers that are designed for AI and cloud deployments must be carefully crafted with purpose, patience and practicality. We hope data center providers approach new projects with the level of consideration they require.

Cooling will be cooler

Data centers that are designed for AI are undeniably complex – not only in how they’re built but how they operate day-to-day, especially when it comes to cooling. While air cooling has proven to be a reliable system in the past, the next-generation GPUs will need over 100 KW of power in a single rack, beyond what this technology can typically support. To keep up with this level of density, more and more data centers are turning to closed-loop, direct-to-chip liquid cooling, enabling closely coupled and denser computing systems.

In 2025 and beyond, we’ll see continued investment in liquid cooling, given densities are only expected to grow as chip transistor density increases further and faster – particularly with NVIDIA’s shift to a one-year versus a two-year innovation cycle. We foresee liquid cooling methods making major strides in the next year and becoming the industry standard for state-of-the-art facilities by 2026.

Capital will be stretched

Strides in data center design and with the technology that operates within, like cooling systems, can only happen with increased investment. Yet, with data centers costing roughly one billion dollars to build, the current investment isn’t enough to design, develop, and operate the “AI-ready” data centers needed today. To fund new projects, many investors will require sufficient confidence in a platform’s track record, but gathering this information may be a challenge for new entrants. This may deter some from raising the necessary capital to fund the next wave of growth.

In 2025, we’d like to see more private capital meaningfully enter the power generation, utility, and grid reinforcement arena, but this will require change. Currently, utilities aren’t structured for opportunistic and entrepreneurial investments, given their fiduciary investor focus since 2000 has been to provide stable dividend growth and protection. To attain the capital for continued development and innovation, we’ll likely see more creative joint ventures, spinoffs from utilities, and/or Independent Power Producers (IPPs) emerge. The structure of raising capital may change, along with the structure of purchasing power.

Power will be more costly

In recent years, it has become increasingly challenging to access powered land as it requires significant capital investment in the grid. Today’s utilities are now asking for bigger financial commitments from data center developers requesting power. Just years ago, utilities generally only asked for a small security deposit for initial power, but in 2025, we’ll see a new structure for securing power: added upfront capital. We anticipate providers will invest more in securing power generation and transmission. By making a commitment upfront, data centers will secure the power they need to stay innovative – in the short and long term.

The changemaker will strike again

While AI can still feel misunderstood, there is one certainty: it is a continued changemaker in the data center industry. Those who embrace the changes with open arms and full pockets will fuel the next wave of innovation. Currently, the U.S. is a global leader in AI, and maintaining this technological advantage comes down to a few musts: remain agile, drive industry investment, accelerate infrastructure development, and find better ways to collaborate to bring it all to life.