Goldman Sachs Research is forecasting global power demand from data centers will increase 50% by 2027 and by as much as 165% by the end of the decade (compared with 2023).
“Recent Chinese developments, and particularly the AI model known as DeepSeek, have raised concern about the returns on current and projected AI investment,” the investment firm said in a Feb. 4 post. “Still, several questions remain about DeepSeek’s training, infrastructure, and ability to scale.”
“In the long run, if we see efficiency driving lower capex levels (from either hyperscalers or new investment plans from new players), this would mitigate the risk of long-term market oversupply we see in 2027 and beyond – which we think is an important consideration that could drive more durability and less cyclicality in the data center market,” says James Schneider, a senior equity research analyst at Goldman Sachs covering US telecom, digital infrastructure, and IT services.
On the demand side for data centers, large “hyperscale” cloud providers and other corporations are building large language models capable of natural language processing and understanding. These models must be trained on vast amounts of information, using power-intensive processors, Goldman Sachs said. On the supply side, hyperscale cloud companies, data center operators, and asset managers are deploying large amounts of capital to build new high-capacity data centers.
Taken together, the balance of data center supply and demand is forecast by Goldman Sachs Research to tighten in the coming years, it said.
The occupancy rate for this infrastructure is projected to increase from around 85% in 2023 to a potential peak of more than 95% in late 2026. That will likely be followed by a moderation starting in 2027, as more data centers come online and AI-driven demand growth slows.
Goldman Sachs Research currently estimates the power usage by the global data center market to be around 55 gigawatts, which consists of cloud computing workloads (54%), traditional workloads for typical business functions such as email or storage (32%), and AI (14%).
“By modeling future demand for each of these workload types, our analysts project power demand will reach 84 GW by 2027, with AI growing to 27% of the overall market, cloud dropping to 50%, and traditional workloads falling to 23%,” it said.
“This baseline scenario could, however, be affected by a deceleration in usage by AI — for example, if the transition to AI-driven work and AI monetization doesn’t develop as quickly as anticipated. In such muted scenarios, demand could diverge from the baseline estimate by 9-13 GW.”
According to Goldman Sachs, the current global market capacity of data centers is approximately 59 GW.
Approximately 60% of this capacity is provided by hyperscale cloud providers and third-party wholesale data center operators (these providers usually have a small number of very large enterprise customers). The remaining belongs to more traditional corporate and telecom-owned data centers, the investment firm said.
The AI-dedicated data center is an emerging class of infrastructure, Goldman Sachs said. Although very few exist so far, they’re designed for the unique properties of AI workloads — high absolute power requirements, higher power density racks, and the additional hardware (such as liquid cooling) that comes with it. They’re usually owned by hyperscalers or wholesale operators.
"Regionally, Asia Pacific and North America have the most data center power and square footage online today — most notably in regions such as Northern Virginia, Beijing, Shanghai, and the San Francisco Bay Area. These places have high compute and data traffic as well as robust corporate campus demand."
Goldman Sachs Research projects that there will be around 122 GW of data center capacity online by the end of 2030.
The mix of this capacity is expected to skew even further towards hyperscalers and wholesale operators (70% versus 60% today). Although Asia Pacific has added the most supply over the past ten years by a wide margin, North America has the most scheduled capacity coming online over the next five years
Given the higher processing workloads demanded by AI, the density of power use in data centers is likely to grow as well, from 162 kilowatts (kW) per square foot to 176 kW per square foot in 2027. (These figures exclude power overheads such as cooling or other functions related to data center infrastructure.)
“Data center supply — specifically the rate at which incremental supply is built — has been constrained over the past 18 months,” Schneider said. "These constraints have arisen from the inability of utilities to expand transmission capacity because of permitting delays, supply chain bottlenecks, and infrastructure that is both costly and time-intensive to upgrade," the investment firm said.
As data centers contribute to a growing need for power, the electric grid will require significant investment. Goldman Sachs Research estimates that about $720 billion of grid spending through 2030 may be needed.
“These transmission projects can take several years to permit, and then several more to build, creating another potential bottleneck for data center growth if the regions are not proactive about this given the lead time,” Schneider said.
