By Gina Rullo
The third quarter of 2023 marks the fifth sequential quarter of double-digit year-over-year (Y/Y) growth for the Data Center Physical Infrastructure (DCPI) market, which has historically grown at mid-single-digit rates for the past decade.
Growth from pandemic-induced orders is waning, but early AI deployments are materializing as a new driver of revenue growth. Some vendors have secured orders for equipment optimized for large-scale AI workloads, which are more than offsetting the decline in pandemic-related orders, and backlogs are rising.
“The generative AI infrastructure story began with the NVIDIA H100 in 1Q 2023, which has remained the industry barometer for AI adoption. End-users have utilized significant resources to obtain initial shipments of the costly and supply-constrained GPU,” said Lucas Beran, Group Research Director for Dell’Oro.
Due to the effort required here, many end-users can only address the power and thermal management infrastructure requirements after or close to receiving those initial GPU shipments.
“Without a doubt, these AI-related power and cooling investments started contributing to market growth in 3Q 2023. This was particularly prominent for rack power distribution units, where customized products with higher power ratings were notable,” Beran said. The next few quarters will increasingly emphasize the transition in DCPI market drivers, from broad-based pandemic induced digitalization and supply chain constraints to large scale, purpose-built AI facilities.”
There were also shifts in three other domains: vendor, geography and products.
From a vendor perspective, Vertiv continued to outpace market growth and gained over two percentage points of market share in the third quarter.
North America, Asia Pacific (excluding China), Europe, the Middle East and Africa (EMEA) were the fastest-growing regions in the third quarter, maintaining double-digit growth rates. Caribbean and Latin American (CALA) revenues grew at a high single-digit rate, while the China market was the only region to decline.
Finally, product growth was broad-based, but thermal management and power distribution grew fastest.
Dell’Oro Group forecasts worldwide DCPI market growth to moderate in 2024 as pandemic-induced orders are filled. However, Dell’Oro Group predicts the market growth rates will remain higher than historic levels as AI deployments increasingly materialize throughout the year.
In the summer, DCPI market growth was revised and forecasted to grow at a 10 percent compound annual growth rate (CAGR) from 2022 to 2027. DCPI vendor backlogs and easing supply chain constraints are propelling double-digit market growth in 2023, according to a previous release by Dell’Oro Group. It was also reported that AI workloads, including Generative AI, have emerged as new, significant, long-term drivers for DCPI market growth.
Gina Rullo is a freelance writer.
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