The worldwide data center segment sandwiched a moderate 4% capital expenditure growth in 2023, which fell between 2022’s double-digit growth and expected healthy gains in 2024, according to a data center capex forecast from Dell’Oro Group. The category, which was led by spending on servers, reached $260 billion.
Increased server demand and average selling prices are expected to be the main drivers going forward, leading to double-digit increases in data center capex in 2024, the group predicted in an announcement this week.
Accelerated computing for AI applications and an expansion of data center footprints are the advancements expected to make an impact on growth in the near future.
Servers represented 41% of data center capex last year. This was followed by “other” data center technology (31%), data center physical infrastructure (11%), storage systems (10%) and Ethernet switching (7%).
Key dynamics in 2023 included a decline in general-purpose servers and storage systems due to turbulence in the supply chain in 2022. The problems led to the placement of excess orders, which caused inventory surges and subsequent corrections. In all, server shipments declined by 8%.
In contrast, accelerated computing experienced a robust year. Spending on GPUs, custom accelerators and other devices more than tripled during 2023, Dell’Oro said. Cloud service providers were key customers as they sought products optimized for, among other things, generative and “recommender” AI.
Network infrastructure experienced what Dell’Oro characterized as “deceleration.” The category — which is dominated by Ethernet switches — did see modest growth during the fourth quarter as the market experienced “a digestion cycle affecting various vendors and product segments,” the report noted.
Data center physical infrastructure (DCPI) was a bright spot with double-digit growth during 2023, according to data center capex forecast. However, the category slowed during the fourth quarter. This was due to “diminishing impact of pandemic-induced digitalization and limited price realization from price increases implemented in 2022.” Marginal growth during the quarter was attributed to AI workloads and retrofitting of power distribution and thermal management in existing facilities.
Dell’Oro found that colocation service providers led in growth due to momentum in DCPI and expansion of global data centers. Microsoft and Google increased data center investments in the U.S., particularly as it related to AI. Amazon experienced a “digestion cycle” following an expansion driven by the pandemic.
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