A recent announcement by U.S. President Donald Trump about a $500 billion investment in data center capacity through a joint venture called Stargate highlights the growing significance of data centers, especially in the AI era. As per reports this initiative will build data centers and create over 100,000 jobs in the United States. Back in India, Mukesh Ambani’s Reliance Industries is pushing to build the world’s largest data center in Jamnagar, Gujarat. Companies, tech giants, and even governments are pouring billions into building these digital fortresses, something described as a “new arms race”!
But why are companies and even governments investing so heavily in data centers? And what impact does this rapid expansion have on economies, both globally and in India?
What is a Data Center?
As per AWS “a data center is a physical location that stores computing machines and their related hardware equipment. It contains the computing infrastructure that IT systems require, such as servers, data storage drives, and network equipment. It is the physical facility that stores any company’s digital data.”
Data centers gained momentum in the 1940s when the US military developed the Electrical Numerical Integrator and Computer (ENIAC), marking the beginning of large-scale computing. They evolved from mainframe computing (1950s-1970s), where centralized systems required specialized environments, to the client-server model (1980s-1990s), which enabled decentralized computing and on-premises server rooms. The internet boom (2000s) led to colocation centers and virtualization, improving efficiency. The cloud computing era (2010s-present) introduced hyperscale data centers (AWS, Azure, Google Cloud), software-defined infrastructure, and hybrid cloud solutions. Today, modern data centers focus on edge computing, AI automation, and sustainability, leveraging renewable energy, liquid cooling, and quantum computing to enhance performance and efficiency.
There are many types of data centers. They are,
Enterprise Data Centers – Owned and operated by businesses for private use. Typically on-premises and customized for specific needs.
Colocation Data Centers – Third-party facilities where businesses rent space for their servers. They provide power, cooling, security, and network connectivity.
Cloud Data Centers – Virtualized data centers operated by cloud providers like AWS, Microsoft Azure, and Google Cloud. Resources are scalable and accessed over the internet.
Hyperscale Data Centers – Massive facilities designed for large-scale computing needs. Used by tech giants to support cloud services, AI, and big data applications.
Edge Data Centers – Smaller, decentralized facilities placed closer to users. They reduce latency and support real-time processing for IoT and 5G applications.
Managed Services Data Centers – Operated by a third-party provider that manages IT infrastructure, security, and support for businesses.
Growth of Data Center Industry
As per Mckinsey, the global demand for data center capacity will increase annually by 19 to 20 percent from 2023 to 2030 to reach an annual demand of 171 to 219 gigawatts (GW).
North America has the largest market share of 38% in the data center market while Asia-pacific is the fastest growing market. The other notable data center markets are Europe & Latin America. The colocation segment has the largest market share while hyperscale is expected to grow rapidly. BFSI, IT and Telecom industries will drive the growth of data centers.
At the same time, India is fast becoming the second largest data center market in the APAC region. Mumbai is the data center king in 2025 with Hyderabad soon to oust Chennai from the second place. For example, STT Global Data Centres India Pvt Ltd signed a Memorandum of Understanding (MoU) with the Telangana government to establish a state-of-the-art data centre campus with an investment of Rs 3,500 crore. . A report by JLL India indicates that the sector is expected to add 604 MW of capacity between the second half of 2024 and 2026, bringing the total capacity from 917 MW to 1,521 MW. This growth is driven by the increasing adoption of AI and the nationwide rollout of 5G technology
Several factors contribute to this growth. Some of them are
Artificial Intelligence (AI) and Machine Learning (ML): The integration of AI and ML across various industries necessitates substantial data storage and processing capabilities, driving the demand for advanced data centers. Moreover, the demand for high-performance computing (HPC) is increasing, driven by AI, scientific research, and other computationally intensive applications .Data centers are being built with advanced infrastructure to support HPC workloads.
Cloud Computing: The widespread adoption of cloud services by businesses and individuals has led to an increased need for data centers to manage and store vast amounts of information.
Internet of Things (IoT): The proliferation of IoT devices generates massive data streams that require efficient processing and storage solutions, further fueling data center growth.
5G Technology: The rollout of 5G networks enhances connectivity and data transfer speeds, resulting in higher data consumption and the subsequent need for robust data center infrastructure.
Digital Transformation: Businesses across all sectors are undergoing digital transformation, migrating their operations to digital platforms and generating more data.
Economic Impact of Data Center Establishments
Data centers are the backbone of the digital economy, driving economic growth, job creation, and technological innovation worldwide. As businesses and governments increasingly rely on cloud computing, AI, and big data, the demand for data centers has surged, leading to significant economic benefits.
1. Job Creation and Workforce Expansion
Data centers create direct and indirect jobs across multiple sectors. Some key job categories include:
Direct Jobs: Engineers, IT administrators, network specialists, and maintenance staff.
Indirect Jobs: Construction workers, electrical engineers, HVAC technicians, and security personnel.
Induced Jobs: Roles in logistics, real estate, and local service industries that support data center employees.
By 2025, India’s data center industry is expected to generate over 300,000 direct and indirect jobs, further boosting the country’s digital workforce.
2. Infrastructure Development: The construction and operation of data centers drive investments in infrastructure, including power supply, cooling systems, and network connectivity. Regions that attract data center investments experience economic revitalization. These facilities require large plots of land, advanced energy infrastructure, and skilled labor, leading to local business growth. Additionally, data center operators pay significant taxes that contribute to public services and infrastructure development.
3. Technological Advancements: The presence of data centers fosters a technology-driven ecosystem, encouraging innovation and the adoption of advanced digital solutions.
4. Economic Growth: Data centers contribute to the GDP by attracting investments, enhancing productivity, and supporting the digital economy.
5. Energy Sector Growth: Data centers are fueling growth in the renewable energy sector, with many operators investing in solar and wind power solutions. Companies like Google and Microsoft are investing in solar and wind energy to power their facilities, reducing carbon footprints while promoting green energy jobs.
In conclusion, the global and Indian data center industries are experiencing significant growth, driven by technological advancements and increasing data consumption. This expansion not only meets the rising demand for data services but also plays a crucial role in economic development, underscoring the importance of continued investment and innovation in this sector.
PeopleLogic Opinion
The rapid expansion of data centers is transforming economies worldwide, driving job creation, technological innovation, and large-scale investments. Globally, they serve as the foundation of the digital economy, enabling AI, cloud computing, and big data while supporting millions of direct and indirect jobs. In India, the data center boom is not only attracting billions in foreign investments but also strengthening digital infrastructure, creating employment, and fostering economic growth. As demand for data storage and processing continues to surge, data centers will remain critical in shaping the future of global and Indian economies, powering industries and digital transformation for years to come.
