AI Reshapes Data Center Investment Priorities

Introduction

Over the past decade, the industry has focused heavily on the so-called “cloud revolution.” Over the last two to three years, however, this concept has begun to lose relevance. What now drives the infrastructure sector is the AI race - an infrastructure arms race that spans geographies, regulatory frameworks, and customer segments.

The data points are converging into a clear picture. According to research by Analytics IoT, global spending on data center equipment and infrastructure reached approximately $290 billion in 2024 and is expected to grow into a trillion-dollar market by 2030. A separate analysis by McKinsey estimates that demand for AI-ready data center capacity will grow at an average annual rate of around 33% through the end of the decade, with roughly 70% of total data center capacity demand expected to be AI-related by 2030.

Against this backdrop, the Uptime Institute’s report on budget planning for 2026 is unsurprising. What it does provide, however, is precise data that highlights structural differences between colocation providers and enterprise operators. This article is based on that report. Enjoy reading.

Who Is Increasing Budgets and Why

According to the Uptime Institute’s spending survey, approximately 68% of data center owners and operators expect their budgets to increase in 2026, representing an increase of around five percentage points compared to a similar survey conducted two years earlier. Only about 7% of respondents reported a decrease in budget or no planned investment at all.

When the data is segmented by operator type, the picture becomes even clearer. Approximately 79% of colocation providers report an increase in

AI Reshapes Data Center Investment Priorities

budget for the coming year, compared with only 66% of enterprise organizations planning to do the same.

2026 – The Acceleration Year

The chart highlights a consistent, multi-year trend. For three consecutive years, colocation providers have led budget growth. This is not merely organic expansion, but a direct response to unprecedented demand for external capacity, primarily from hyperscalers, GPU cloud providers, and enterprises that prefer to avoid capital-intensive investments in new in-house data centers.

Capital Allocation Priorities: Power, Cooling, and IT Capacity

The next question is where capital is being allocated. The Uptime Institute data shows a clear hierarchy of priorities:

• 63% plan to increase investment in power
• 56% in IT equipment
• 54% in cooling equipment
• 51% in electrical infrastructure

These figures leave little room for interpretation. Physical infrastructure, and particularly power-related components, now dominate investment decisions.

Investment Areas for 2026: Colocation vs. Enterprise

A deeper breakdown reveals a structural gap. Colocation providers are investing significantly more in power, cooling, and electrical systems

compared to enterprise operators. Enterprises, by contrast, show consistently lower investment rates across nearly all physical infrastructure categories.

Industry-Wide Perspective

The emerging picture is that of an industry fully aware that the central challenge of the coming years is power availability, high-density IT deployments (GPUs, accelerators, advanced networking), and cooling systems capable of handling thermal loads that were largely absent from traditional data center designs.

This aligns with findings from additional sources. According to surveys conducted by Uptime and others, cooling accounts for approximately 35%–40% of total energy consumption in an average facility, and often more in high rack-density environments. The introduction of AI workloads further intensifies this challenge, driving accelerated adoption of direct liquid cooling, immersion, and hybrid solutions. While these technologies still represent a minority of global deployments as of 2024, their trajectory is clear.

At the same time, investment in new facilities continues to rise. Recent market analyses estimate that the global data center infrastructure market will maintain double-digit growth through the end of the decade, driven largely by hyperscale cloud and AI providers such as Microsoft, Google, and Oracle, which are dramatically increasing CapEx allocated to AI-dedicated data centers.

Key Drivers of Budget Growth: Capacity vs. Efficiency

One of the most revealing sections of the report examines the primary drivers behind increased spending.

For colocation providers, the message is unequivocal. Sixty-nine percent cite capacity expansion as the main driver of budget growth, compared with only 47% among enterprise operators. Enterprises, on the other hand, place greater emphasis on efficiency improvements (23%) and environmental sustainability (9%), compared with just 5% among colocation providers.

This distinction is critical. Colocation providers are under direct pressure to build additional capacity in order to meet market demand. Enterprises are instead focused on extracting more value from existing assets – improving PUE, consolidating workloads, increasing automation, and enhancing sustainability, often without expanding physical footprints at the same pace.

This is consistent with global Uptime surveys, where operators repeatedly identify capacity planning as one of their most significant challenges, particularly in recent years as rack densities and power requirements have increased sharply.

Cost Optimization Elsewhere: Staffing and Software

Alongside rising investment in physical infrastructure, some operators are planning to reduce spending in other areas:

• Approximately 30% plan to reduce staffing investment
• Approximately 26% plan to reduce software expenditure

This reflects a broader structural shift toward increased automation, advanced DCIM platforms, and AI-driven operations, alongside reduced reliance on human labor for day-to-day facility management and a gradual migration of certain capabilities to cloud-based and SaaS solutions.

Other Uptime reports and recent industry publications point to the same conclusion. As facilities become more complex and power-intensive, operators must contend with skilled labor shortages while simultaneously being pushed toward higher levels of cost efficiency.

Grid Constraints and Regulation: Power Becomes a Systemic Issue

Electricity demand from data centers is increasingly creating direct tension with other

energy consumers. Recent publications suggest that many operators worldwide are reserving large blocks of grid capacity, often exceeding actual near-term requirements, effectively limiting access for new connections.

Surveys conducted by DataCenterKnowledge and similar bodies indicate that utilities are facing shortages in available capacity, transmission constraints, and substation limitations. As a result, closer collaboration between utilities and data center operators is becoming essential, particularly around demand management and flexible energy solutions.

At the same time, regulators in many regions, especially across Europe and parts of the United States, are tightening environmental requirements. These include mandatory reporting on water usage, waste heat recovery, carbon targets, and the integration of renewable energy into the financial planning of new AI and data center projects.

AI, Cooling, and Heat Management: Why 2026 Matters

One theme appears consistently across industry reports: heat. Modern GPU and AI servers can consume tens or even hundreds of kilowatts per rack, generating thermal loads that differ fundamentally from traditional application servers.

More than 50% of operators now believe that liquid cooling solutions will become dominant in high-density deployments within a few years. This

shift is already underway. Practically, it requires a fundamental redesign of data halls, piping systems, and HVAC architectures, alongside increased adoption of chillers, CDUs, immersion cooling, and cold-plate technologies.

In parallel, waste heat reuse is gaining renewed attention, particularly in Europe, where legislation such as Germany’s EnEfG already mandates heat recovery and improved energy efficiency.

Looking Ahead: 2026–2030

Combining the Uptime Institute’s findings with broader market research highlights several clear trajectories. AI-ready capacity is emerging as the primary growth engine, with demand expected to grow at double-digit rates and represent the majority of total data center demand by the end of the decade. Colocation providers are becoming central actors in this transition, serving as the primary platforms enabling rapid AI deployment at scale.

At the same time, grid access and regulatory constraints are evolving into critical bottlenecks. In many regions, the challenge is no longer demand itself, but whether an additional 100–200 MW can realistically be connected. Operators capable of forming effective partnerships with utilities and delivering creative energy solutions will gain a decisive advantage.

Conclusion

Those building today will define tomorrow’s AI infrastructure landscape. The Uptime Institute’s 2026 report reinforces trends already visible on the ground. Budgets are rising, particularly among colocation providers. Capital is flowing primarily toward power, cooling, and IT capacity. AI-driven expansion is the dominant force, while efficiency and sustainability have shifted from optional enhancements to regulatory and financial necessities.

At the same time, staffing and software account for a smaller share of total budgets, reflecting increased automation and a renewed focus on physical infrastructure. In an environment where each new AI model requires additional megawatts, data centers are increasingly treated as critical national infrastructure, alongside roads, ports, and railways.

The fact that nearly 80% of colocation providers are increasing budgets, and that most are doing so to expand capacity, underscores their role as the foundational platforms of the AI era. Enterprises and cloud providers alike will increasingly rely on colocation, driven by the immediate need for available power and deployable infrastructure. Efficiency and sustainability will not slow this expansion, but will instead determine which business models remain viable in the years ahead.