Data centre industry facing cost pressure

The DC industry faces a 26.3% volume CAGR through FY28 as AI demand competes with rising input costs.

David Kennedy · Venture Insights5 April 2024Period: FY244 min read

19.9%↑

Expected DC industry revenue CAGR to FY28

$2.5bn→

Estimated total Australian DC revenues (FY23)

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Abstract

This report analyses the Australian data centre (DC) industry, forecasting a revenue rise of 19.9% CAGR to FY28. While demand is bolstered by compute-heavy applications like AI, the sector faces significant headwinds from elevated power prices and construction cost pressures. The analysis highlights that hyperscale investment will drive a 26.3% volume CAGR, with Sydney and Melbourne maintaining over 80% of total capacity, though global chip shortages and US-centric AI capacity pose strategic sovereignty risks for Australia.

Key Takeaways

The Australian data centre industry revenue is forecast to grow at a 19.9% CAGR to FY28, driven by cloud and AI demand.
Total built volume is expected to grow at a 26.3% CAGR through FY28, with hyperscale accounting for 60% of demand.
Sydney and Melbourne remain the dominant hubs, currently representing over 80% of total Australian capacity.

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Frequently Asked Questions

The industry is projected to grow revenue at a 19.9% CAGR through FY28, building on a $2.5bn revenue base established in FY23. Total built volume will expand even faster at a 26.3% CAGR, driven primarily by massive hyperscale investment.

Rising power prices and construction costs are creating significant headwinds that will likely stabilise capacity pricing. These cost pressures challenge the industry's ability to meet a demand profile where hyperscale alone accounts for 60% of total volume.

Australia faces a significant strategic bottleneck as NVIDIA controls 82% of the GPU market, keeping high-end AI computation concentrated in the US. The scale disparity is stark: Microsoft’s proposed 5GW AI data centre in the US is 50% larger than the entire projected Australian industry capacity for FY28.

Investment remains highly centralised in Tier 1 markets to leverage existing connectivity. Sydney and Melbourne currently command over 80% of total Australian capacity, a dominance that shows no signs of diluting despite rising regional demand.

Data centre industry facing cost pressure

Abstract

Key Takeaways

Frequently Asked Questions

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