- Developers are swooping in to take part in the data center gold rush
- But even with demand high, it's still not a 'build it and they will come' market
- Builders need a marketing hook and an understanding of power dynamics so they don't end up underwater
The number of data centers is about to explode. But that doesn’t mean every project will be a success. In fact, data center projects can and do get into trouble more often than you’d think. And there’s an increasing risk of that happening as builders and investors swarm to capitalize on the AI gold rush.
“Everybody that I talk to…They think all they have to do is build it and they will come. But buyers in this market are inundated with product,” Wired Real Estate’s Founder and CEO Everett Thompson told Fierce. “So, you have very smart people placing very large bets without the right strategy.”
According to Synergy Research Group, the top 20 cloud and internet service firms collectively had 1,149 data centers across the globe as of April 2025. Synergy noted in March the known pipeline of hyperscale data center projects stood at 504, with 130 to 140 new facilities expected to come online each year over the next few years.
These aren’t small projects, either. Boston Consulting Group (BCG) predicted in January that the average size of data centers in the U.S. will jump from 40 megawatts (MW) to 60 megawatts by 2028, “with about a third of campuses above 200 MW.” Don’t forget the gigawatt-scale outliers – like those being built by Crusoe, Stack Infrastructure and others – either.
It’s worth stating that these projects are NOT a walk in the park. As BCG noted “disruption can emerge from any component of the supply chain, from power and cooling systems to networking infrastructure and even the construction workforce.” Lead times for backup generator have jumped from months to years, the firm said by way of example,.
In a world where time equals money, delays equate to money lost. And as Foresight Works co-founder Atif Ansar recently told Fierce, nearly nine out of 10 projects has a delay and those delays average 34%.
Risk vs reward
Delays are obviously bad, especially considering projects which run over time also often run over budget. But Thompson – who has worked with the likes of Coresite, Iron Mountain and H5 Data Centers among many others through WiredRE – argued developers also need to know how to market the facilities they’re building and who to market them to.
“If you’re a new entrant, you’ve got to have a hook, you’ve got to have some way to win,” he said. “Can you take advantage, with a commodity product, of imbalance between supply and demand? Yes, but that’s not a winning strategy. That’s a passive strategy; that’s like rolling the dice and there are a lot of people gambling on that.”
Part of developing a strategy is about building the right relationships with the right people. But it’s also knowing how to navigate the imbalance of power that exists between small, new developers and the massive hyperscalers looking to set up shop in their buildings.
“That’s a huge risk that a lot of these newer developers aren’t going to understand. Microsoft and the Magnificent Seven are sophisticated, they’re wholesale buyers,” he said.
“They’re going to come out and contract for a lot and who’s to say that they’re going to follow through. And it’s your time and money, so that’s another way you can get upside down on a project.”
Lest you think this is a hypothetical, reports recently suggested Microsoft was pulling back on its data center expansion. On an earnings call, though, CEO Satya Nadella said it wasn’t pulling back so much as moving projects to follow demand.
The takeaway? Just like during the historic gold rush, there will be winners and losers in the data center market. Developers should take care to ensure they’re not the ones who come in hopeful but end up penniless.