European Data Centres to Expand by 22% but Still Face AI Demand Challenges
European data centres capacity is set to grow by 22% in 2025, yet demand for artificial intelligence (AI) infrastructure is outpacing supply. Industry experts warn that this could leave Europe lagging behind the U.S. and China in the AI race.
Grid Constraints and Space Shortages Limit Growth
Despite expansion efforts, Europe’s data center industry faces critical challenges, including electric grid congestion and a lack of suitable locations. The most affected regions are major hubs such as Frankfurt, London, Amsterdam, Paris, and Dublin, where power limitations are slowing development.
As a result, secondary markets are seeing rapid growth. Milan, Warsaw, and Berlin are among the fastest-expanding cities for data centers in 2025, with companies also looking beyond urban areas to meet demand.
Hyperscale Data Centres Drive Investment
Tech giants like Google and Amazon are moving forward with hyperscale data centre projects, while European corporations are also increasing their AI-related infrastructure investments. CBRE, a consultancy firm, forecasts that around 9.1 gigawatts of capacity will come online this year, with hyperscalers accounting for over a third of that.
The cost of building colocation space, where large companies rent sections of a data centre, is estimated at 12 million euros per megawatt. This suggests the European data center market will grow by more than 100 billion euros in 2025. However, this figure remains far behind U.S. investments, particularly the “Stargate” initiative, where Oracle, Microsoft, and OpenAI plan to spend $500 billion over four years.
Europe Risks Losing AI Leadership
China’s DeepSeek recently introduced more energy-efficient AI models, intensifying global competition. While this could improve AI efficiency, it does not address Europe’s immediate challenges of power shortages and infrastructure limitations.
Industry leaders warn that if Europe does not accelerate data centre expansion, it risks becoming dependent on AI infrastructure from the U.S. and China. “Europe risks falling into technological dependency,” said Stijn Grove, managing director of the Dutch Data Center Association.
with inputs from Reuters