Data Center Capacity Crisis Threatens Europe's AI Ambitions
Amidst rapid European data center expansion, an estimated 22% increase in capacity this year, industry experts warn that demand continues to outpace supply, posing a risk to the region's AI competitiveness.
China's DeepSeek's recent announcement has cast a shadow on the market, highlighting the potential for more energy-efficient AI models. However, this development is unlikely to alleviate Europe's pressing challenges, including grid constraints and limited suitable sites.
Hyperscale data centers, led by tech giants like Google and Amazon, are driving expansion, accompanied by a growing demand for AI-related infrastructure from European corporations.
"Supply is struggling to keep pace with the surge in demand," said Kevin Restivo, CBRE's Director of Data Center Research.
Space constraints are particularly acute in major European data center hubs such as Frankfurt, London, Amsterdam, Paris, and Dublin, where grid limitations hamper capacity growth. Consequently, secondary markets like Milan, Warsaw, and Berlin are experiencing rapid expansion, with companies exploring locations outside urban areas.
CBRE estimates that new data center capacity coming online in 2025 will be powered by approximately 9.1 gigawatts of electricity, with hyperscalers consuming over a third. The average cost of colocation space in Europe is estimated at 12 million euros per megawatt, indicating industry expansion exceeding 100 billion euros this year.
However, this growth lags behind significant U.S. investments, exemplified by the Oracle, Microsoft, and OpenAI's "Stargate" initiative, which aims to invest $500 billion over the next four years.
"Europe faces the risk of technological dependency if it fails to keep pace with the U.S. and China in AI innovation," warned Stijn Grove, Managing Director of the Dutch Data Center Association.