The Rise of Data Centers
Recently, I read an article in WSJ about how governments in Europe are trying to funnel the heat that data centers produce into municipal heating networks to heat homes and offices as a part of a greater effort to become more energy efficient. This led me to go down a rabbit hole of learning more about data centers. In this post, I want to talk about the rise of data centers and the trends of the space.
Let’s first back it up here. What even are data centers? All the data that, say, Amazon has needs to be stored somewhere. When people say “the cloud,” it doesn’t mean that data is floating around somewhere in space without costing anything. This data needs to be stored somewhere called a data center. The term “the cloud” simply refers to companies choosing to use off-premise data centers rather than on-premise ones. The main appeals of doing this are 1) scalability (scalability of on-premises data centers is limited to by the company’s infrastructure) and 2) cost (off-premises data centers are cheaper for companies since the data center provider takes advantage of economies of scale to operate cheaper and companies can share data centers with other companies to drive down costs).
More companies migrating to the cloud has led to the rise in demand for off-premises data centers. This is where turnkey data centers come into play. Companies like Cannon Technologies offer pre-built, ready-to-use data centers that are useful for companies who are looking to quickly scale. I have conviction that as companies continue to migrate to the cloud and expand, turnkey data centers will be very lucrative investments.
How is the development of AI affecting data centers? Everyone is talking about ChatGPT now and there’s no doubt that training AI takes enormous amounts of data. How does this affect data centers? Microsoft invested $10B in OpenAI and Google and Meta have also made significant investments in the development of AI. As AI develops further, it’ll become more widespread and companies will require data centers that can support these AI efforts.
What about the increased concern for data privacy? In my CIS 545 class (shoutout to Professor Ives), we learned that one way that companies try to protect user data is by adding noise to the “pure” / “raw” user data such that trends in data use can still be determined, but data about real users is lost among the sea of noise. What does this mean for data centers? Well, if a company is adding more data to its systems to ensure the privacy of its users, that means that it needs to store the data somewhere. Where? You got it, data centers! This means that increased concerns for data and privacy protection will also increase the demand for data centers.
Clearly there’s a demand for data centers and the push towards a future of AI and data security is going to keep fueling these demands. So, do we just build more data centers? The current state of data center usage is that companies are using data centers that were built for a wide variety of uses and support many different functions. However, there may be a shift in the data center space into specialized data centers. There could be data centers that are specifically for video streaming, AI, etc.
Overall, I have strong conviction that data centers are not going anywhere and are going to flourish in the near future. Data is everywhere and will continue to be extremely important moving forward. Keeping an eye on trends in the data center space tells one a lot about where companies are going and what software technologies are on the rise.
