1Q25 IB: Executive Summary
The first quarter of the year was an eventful one to say the least. Bearish sentiment emerged as the DeepSeek findings caused concerns with over-investment and this was followed by reports that a number of hyperscalers pulled back on commitments to data centre infrastructure leases and land acquisitions. The hyperscale pullbacks seemed to reinforce and provide low-hanging fruit for those investors that were getting a bit edgy. The numbers are big, and a lot is at stake, so concern and caution are expected. And the experiences of the dotcom bubble, the financial crisis, and the bumpy post-pandemic re-entry have not been forgotten, even if they are imperfect parallels to what is happening now. The fact is the sector is on solid footing and there is plenty of empirical evidence to back up this view. Earnings season showed steady and healthy results, KPIs were consistent, hyperscalers reaffirmed commitments to CapEx levels that are sure to funnel into the hyperscale and data centre colocation ecosystem and demand pipeline, while new categories like GPU cloud are tracking aggressively and providing a glimpse of what the future may look like when AI really starts to take off. Yes, there are those with a more bearish perspective, but this is still a minority opinion, and investors are making big bets and capital continues to pour into the sector to support hyperscale demand. Long-term projections and some of the overall silliness around AI infrastructure may have been started to be dialled back. But that is a good thing as the sector continues to focus efficiency and building in an environment where resource constraints are still a factor and demand is outpacing supply. AI is going to set the course for this next wave of infrastructure expansion. But the numbers show that the market is still about traditional hyperscale cloud infrastructure and how it continues to mature and evolve, and drive adoption and uptake. This report takes a close look at the noteworthy trends and developments from the recent 1Q25 period. A more detailed look at the M&A landscape, APAC region and hyperscale cloud sectors is available to clients in separate quarterly reports.
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