European Data Center Capacity Struggles to Meet AI Demand

European data centers are experiencing a surge in demand, prompting a projected 22% expansion in capacity this year. However, industry analysts warn that this growth may still fall short of meeting the region's need for artificial intelligence (AI)-related infrastructure.

Despite the recent announcement of DeepSeek's energy-efficient AI models, Europe continues to face challenges with grid congestion and limited suitable sites for new data centers. Tech giants such as Google and Amazon are ramping up their hyperscale facilities, while European companies are also seeking more AI-centric space.

"Providers are struggling to keep pace with the rapid growth in demand," stated Kevin Restivo, Director of Data Center Research at CBRE.

Space constraints are particularly acute in major European hubs like Frankfurt, London, Amsterdam, Paris, and Dublin, where grid limitations are restricting capacity expansion. This has led to the emergence of thriving secondary markets across Europe, with Milan, Warsaw, and Berlin expected to grow significantly by 2025.

CBRE predicts that the total capacity added this year will reach approximately 9.1 gigawatts, with hyperscalers accounting for over a third of this growth. The average cost of building colocation space in European data centers is estimated at 12 million euros per megawatt, resulting in an estimated investment of over 100 billion euros for the industry this year.

However, this pales in comparison to ongoing investments in the United States, including the massive "Stargate" initiative involving Oracle, Microsoft, and OpenAI, which is anticipated to cost $500 billion over the next four years.

"Europe risks becoming technologically dependent, with AI leadership potentially consolidating between the U.S. and China," cautioned Stijn Grove, Managing Director of the Dutch Data Center Association.