Data centres could attract large amounts of FDI
Data centre construction could stimulate the economy and attract large amounts of foreign direct investment, according to a report published by a leading figure in the data centre industry. They will need investment from governments first, though.
A new white paper published by Khazna has suggested that investing in data centres could supercharge the UK. Founded in 2012 by Mubadala Investment Company, a national wealth fund in the United Arab Emirates, Dubai-based Khazna designs, builds and operates wholesale 16 data centres between Abu Dhabi and Dubai. And according to the firm’s report, data centres are – among other things – magnets for foreign direct investment.
That is because, increasingly, data centres are synonymous with the hype surrounding AI. AI requires massive amounts of data and training to produce as needed. With the AI hype train approaching its second year of global notoriety, however, the massive amounts of data and power needed to power AI have not necessarily paid off. Most people feel the technology has underwhelmed – and as its proponents beg for more time, the emphasis has shifted to producing more data centres. More of those, they argue, offer more chance of the technology finally living up to its potential.
The report – typed up by professional services firm Whiteshield on commission from Khazna – plays to this, by noting that GenAI revenues could be worth as much as $1.3 trillion to the global economy by 2032. But to fuel that growth, the paper continues, there will also need to be a rapid expansion in data centres. Staff requirements are already forecast to grow from 2 million to 2.3 million between the years 2019 and 2025, for a start – suggesting that there is potential for even larger expansion in the years ahead.
This surge could also yield major economic gains around the world, with data centre demand fuelling a construction boom. In the United States (US), for example, during the construction of a typical data centre with, the researchers found there was a capital expenditure of $215.5 million, with 1,688 local workers employed and an average of $243.5 million in output generated.
Once these centres are produced, the researchers note that there is also potential to attract huge amounts of foreign direct investment – particularly in Europe. Of the $44.8 billion of FDI sunk into data centres in 2022, more than $20 billion headed to Europe. At present, Germany and the UK are making the most of this – with more than 500 data centres each – compared to just over 300 in nearest continental-competitor France.
Philippe Nahas, Partner at Whiteshield, commented, “Investing in robust data centre infrastructure is not just about technological advancement; it's a strategic catalyst for economic prosperity and job creation. Data centres play a crucial role in the ICT sector by hosting cloud services, supporting digital content distribution, and enabling data analytics, among other things. As such, countries with a robust data centre market often have a vibrant ICT sector, as the availability of advanced data centre infrastructure facilitates the development and deployment of cutting-edge ICT solutions.”
However, there are still notable questions to address before governments simply turn on the taps to invest in this apparently endless opportunity more thoroughly. Most notably, there is sustainability to factor in. The report admits that huge amounts of power will be needed to run every data centre. While the report is very happy to take the fact many businesses are setting ambitious sustainability targets while harnessing the potential of data centres, many of these firms are already struggling to meet existing targets relating to aspects of their business that do not require exponential amounts of energy and data.
At the same time, beyond graphs with lines going up suggesting the AI economy of the future will only ever grow, there is little to suggest this gamble will pay off with meaningful economic growth. With growing murmurings that the AI bubble is about to burst, and many governments finding themselves short for cash, it remains to be seen how committed they are to shovelling funding into a money-pit that may never deliver a return. And if they are committed to that, simply from the perspective of stimulating economic growth and creating jobs in a Keynesian sense, why not use those funds to hasten their transition to renewable energy?
