AI – the x factor of 2025

AI has become a strategic asset, driving competition among global powers. The United States is leading the way, leveraging its deep capital markets and robust public-private partnerships to maintain its technological superiority. Meanwhile, China’s strategic Five-Year Plans provide a clear and decisive roadmap for efficient implementation. This model enables rapid scaling in strategic sectors, with an ambitious focus on data centre expansion to support AI development. Europe, while strong in energy
infrastructure, struggles with fragmented capital markets and slower decision-making, limiting its ability to compete at scale.

These disparities reflect broader strategic shifts. Nations are competing not only for economic dominance, but also for echnological leadership, which increasingly defines geopolitical influence. The implications for investors are clear: portfolios must align with these structural transformations and identify leaders in innovation and infrastructure.

Data centres are the physical backbone of the AI revolution. They process the massive datasets required for machine learning models, host cloud infrastructure and provide the computational power that fuels AI applications. It is therefore not surprising that their expansion is a critical enabler for the broader adoption of AI.

Globally, the data centre sector is poised for rapid growth. The United States remains a dominant player, with revenues expected to exceed $130 billion by 2025, driven by hyperscalers such as Amazon Web Services, Microsoft Azure and Google Cloud. Europe, however, lags significantly, with data centre capacity per GDP almost half that of the US. This disparity presents an opportunity for targeted investment, particularly as demand for data storage and processing continues to outpace supply.

In China, the story is different, but equally compelling. Over the past two years, the government has invested $6.1 billion in data infrastructure, positioning itself as a main challenger in both scale and innovation. Revenue from the Chinese data centre market is forecast to grow at a CAGR of 9% from 2024 to 2029.

China’s data centre market offers a unique blend of opportunity and complexity. The nation’s centralized planning and state-backed investments have driven a rapid buildout of infrastructure. Key regions, such as the Beijing-Tianjin-Hebei area, the Yangtze River Delta and the Greater Bay Area, account for the lion’s share of this growth, supported by favourable government policies such as the “Action Plan for High-Quality Development of Computational Power Infrastructure”.

This growth is not without challenge. China’s expertise in rapidly building massive infrastructure comes with the downside risk of overcapacity, which can impact investment performance. Additionally, regulatory uncertainty adds complexity to the market. However, recent initiatives, such as allowing wholly foreign-owned data centres in pilot zones, signal a shift toward liberalization. Nevertheless, investors must approach these opportunities with caution and strategic foresight.

Despite these hurdles, the fundamentals remain strong. China’s data centres benefit from a dynamic tech ecosystem, a massive user base, and accelerating adoption of AI and cloud services. These factors, coupled with government support, make the country an attractive but nuanced investment destination.

Europe’s data centre market, though still underdeveloped, holds significant potential. Political momentum is building, with reports such as the Draghi Report (“The Future of European Competitiveness”) emphasizing the strategic importance of closing the
infrastructure gap to ensure technological sovereignty. The region’s robust and interconnected power grid provides a strong foundation for scaling data centre capacity, particularly in countries such as France, Spain and the Nordics (Denmark, Finland, Iceland, Norway and Sweden), which can take advantage of abundant renewable energy.

This convergence of political will, energy infrastructure and market demand create fertile ground for growth. However, success will depend on Europe’s ability to streamline capital flows and incentivize private investment.

For investors, data centres represent a critical link in the AI value chain, offering both stability and growth potential. A strategic approach to portfolio construction can maximize these opportunities:

Core Allocation to Hyperscalers: The top five hyperscalers are projected to invest over $1 trillion in AI and data centre infrastructure by 2027. Their scale, integration and ability to drive innovation make them indispensable.

Satellite Allocation to Data Centres: Europe’s infrastructure deficit and China’s rapid expansion present compelling opportunities. In Europe, the gap between supply and demand creates a favourable pricing environment, while in China, the sheer scale of growth offers outsized returns for those willing to navigate the risks.

AI is poised to be the defining X factor of 2025, with data centres serving as the cornerstone of its transformative impact.

The widespread adoption of AI is set to enhance productivity, profitability and growth potential. Data centres are not just enablers of technology but also key drivers of economic growth, geopolitical shifts and investment returns. For investors, the question is not whether to invest in the sector, but how to strategically allocate capital across regions and segments.

In this era of rapid innovation, data centres symbolize the AI revolution— a dynamic, rapidly evolving landscape where innovation meets opportunity. By understanding the nuances of this market, from China’s strategic ambitions to Europe’s untapped potential, investors can position themselves at the forefront of this transformative wave.