He JP Morgan projects that the Data center spending could contribute 10 to 20 basis points to US economic growth in the period 2025-2026as the technology companies compete to benefit from the rise of Artificial intelligence.
Investments in data centers, which help provide computing power for AI, have skyrocketed since OpenAI launched ChatGPT in 2022. This process comes as companies across industries increasingly move their operations to the cloud and integrate AI into their offerings.
Large cap companies operating in the cloud, such as Microsoft and Alphabet, made significant investments related to AI.
GDP boost
The impulse to Gross Domestic Product (GDP) could come mainly through the data center construction demand and investment in technological equipment for additional energy generation and transmission infrastructure, the Wall Street brokerage stated.
According to the estimates of JP Morgandata center spending could contribute between 0.1% and 0.3% to market growth GDP in 2024.
Although the brokerage’s estimates exclude the costs of new power generation, it is expected that each 5-10 gigawatts of new capacity could require an expenditure of US$20,000 millioneither 7 basis points of GDP.
US electricity consumption will reach historic highs in 2025 and 2026the Energy Information Administration announced Tuesday in its Short-Term Energy Outlook (STEO) report.
There was also help from the political front, as the president Joe Biden signed an executive order Tuesday to provide federal support to address massive power needs for fast-growing, advanced AI data centers.
“The data center boom is likely to continue for at least a couple more years, given continued advances in AI innovation and its potential to generate positive economic impact,” he says. JP Morgan.
However, the brokerage added: “Whether that growth continues well into the second half of the decade will then depend, similarly to the telecommunications (boom) episode, on whether the expected return on these investments materializes.”
Source: Ambito
