Goldman Sachs report finds more data centers and even more power will be needed to support growing AI demand Credit: Gorodenkoff / Shutterstock 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, according to a recent report from Goldman Sachs Research The industry is shrugging off the potential of DeepSeek – which claimed large-scale AI modeling capabilities from low-end hardware – and is instead focused on efficiency, wrote James Schneider, a senior equity research analyst covering US telecom, digital infrastructure, and IT services, in the data center demand report. Still, several questions remain about DeepSeek’s training, infrastructure, and ability to scale, Schneider stated. “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,” Schneider stated. On the demand side for data centers, large hyperscale cloud providers and other corporations are building increasingly bigger large language models (LLMs) that must be trained on massive compute clusters. Meanwhile, hyperscale cloud companies, data center operators, and asset managers are deploying large amounts of capital to build new high-capacity data centers. But the balance of data center supply and demand is forecast by Goldman Sachs Research to tighten in the coming years, according to the report. This means data center occupancy 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, Schneider stated. Goldman Sachs Research estimates the power usage by the global data center market to be around 55 gigawatts, which breaks down as 54% for cloud computing workloads, 32% for traditional line of business workloads and 14% for AI. By 2027, that number jumps to 84 GW, with AI growing to 27% of the overall market, cloud dropping to 50%, and traditional workloads falling to 23%, Schneider stated. Goldman Sachs Research estimates that there will be around 122 GW of data center capacity online by the end of 2030, and the density of power use in data centers is likely to grow as well, from 162 kilowatts per square foot to 176 KW per square foot in 2027, thanks to AI, Schneider stated. “Data center supply — specifically the rate at which incremental supply is built — has been constrained over the past 18 months,” Schneider wrote. 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 result is that due to power demand from data centers, there will need to be additional utility investment, to the tune of about $720 billion of grid spending through 2030. And then they are subject to the pace of public utilities, which move much slower than hyperscalers. “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 wrote. SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe