Capital spending in data centers has experienced a significant 46% increase in the second quarter of 2024, according to a report from market analysis firm Dell’Oro Group. This increase has been mainly driven by the growing demand for accelerated servers for generative artificial intelligence applications, which have dominated the market among hyperscale cloud service providers.
Accelerated servers, equipped with next-generation GPUs such as NVIDIA Hopper and custom accelerators like Google TPU and Amazon Trainium, have been key in the investment growth. “Sales of these servers for generative AI applications have seen four consecutive quarters of triple-digit year-over-year growth,” explained Baron Fung, senior research director at Dell’Oro Group. “The strong demand came from both hyperscale cloud service providers and tier 2 cloud service providers and enterprises.”
Dell leads in server revenue
In terms of revenue, Dell ranks as the leading server manufacturer, followed by HPE and Supermicro. Accelerated servers accounted for approximately 41% of total server OEM (original equipment manufacturers) revenue during the quarter, highlighting the growing importance of these equipment in data centers. In addition, white-label server manufacturers managed to capture over 50% of the market share in revenue, benefiting from this hyperscale capital spending growth cycle.
Future outlook: more growth driven by AI
The Dell’Oro Group report anticipates that global data center capital spending will grow by 35% in 2024, with accelerated servers being the main drivers of this increase. This growth will continue through 2025, driven by new platform deployments such as NVIDIA Blackwell and other custom accelerators that will be crucial for hyperscale cloud service providers and the rest of the market.
Despite current economic uncertainties, the general-purpose server market has also shown signs of recovery, mainly due to the upgrade to fourth and fifth-generation CPU platforms.
The future of data centers
With the expansion of the accelerated server market and the increasing adoption of artificial intelligence platforms, the data center sector seems to be on a path of sustained growth. Investments will continue to flow towards advanced technologies that optimize performance and processing capacity, driven by the growing needs of AI and large-scale data analytics.
This growth cycle underscores the crucial role that accelerated servers play in modern digital infrastructure, where generative AI applications are increasingly taking center stage, and companies are reconfiguring their data centers to face future challenges.
Source: Dell OGroup