WSS: Tail end of earnings season sees more hyperscale growth as global expansion activity shows no signs of slowing down
Things have picked up pace again as the US Thanksgiving holiday came to a close and we enter the stretch run of the calendar year. Earnings season has also wound down and Alibaba was the last hyperscaler to report. Alibaba’s cloud infrastructure arm continues to be in the midst of a remarkable turnaround. It has seen revenue growth accelerate aggressively over the last several quarters as AI uptake drives raw cloud infrastructure consumption. Like the other hyperscalers, Alibaba is seeing demand outpace supply as it invests aggressively in CapEx to support the pace of growth. Alibaba is also seeing how AI adoption is creating a reinforcing effect around raw cloud infrastructure. As organizations deploy AI, they are investing more in infrastructure to take full advantage.
Earnings seasons spans a wider cross-section of the ecosystem these days and we are also tracking the publicly listed energy companies. The likes of AEP and Dominion Energy are seeing heavy demand from the data centre and hyperscale sectors and as a result, they are investing heavily to build out the transmission capabilities necessary to meet these escalating demand levels.
The past week saw a flurry of hyperscale expansion activity in Europe and this involved a number of self-build projects. In the Netherlands, Google has self-built a data centre, while Digital Realty opened a new 27MW facility in the Amsterdam area. Elsewhere on the continent, Microsoft launched a new cloud region in Belgium, while Oracle Cloud opened a second cloud region in Italy. Meanwhile, AWS acquired land in Frankfurt and the UK for self-builds.
In APAC, South Korea has seen an uptick in activity as it takes steps to becoming a regional AI hub. OpenAI recently signed a number of MoUs with various South Korean technology companies and Samsung Electronics and SK Hynic will supply chips to the Stargate UAE project. Princeton Digital Group is entering the Seoul market and recently broke ground on a new campus build in Jakarta, Indonesia.
The past several weeks have also seen heavy expansion and investment activity in the AI and neocloud space. This has not slowed as Lambda closed a $1.5b Series E round that will fuel more data centre builds. Notably, Lambda is the latest neocloud to now be considering self-builds. The deal activity is constant. In the past week, we saw a major Anthropic contract that will see it commit to spending $30b to build on Microsoft Azure, while Verne won a deal with Nscale in Iceland.
The sector continues to evolve and the rapid pace of expansion has attracted plenty of groups keen to tap into the opportunity. The interest has led to the fake data centre. This part of the market will take some time to shake out, but another angle to this issue is the fake delivery date. Projects might be real, but can they be completed on time or within a reasonable time frame? Our contributor Dan Golding of Appleby Strategy Group examines.
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