AI Factories Need Homes: New Data Center Markets Are Opening Up
Sessions at Data Center World 2025 revealed the next hot spots for AI-ready data centers – where power, land, and policy align.
Choosing where to build new data centers is a big decision with long-term consequences. Several sessions at Data Center World 2025 focused on where data centers should be positioned, particularly the so-called ‘AI factories’ that are emerging to serve high-performance workloads.
Location influences nearly every aspect of data center planning – from construction costs and leasing rates to access to skilled IT staff and proximity to customers. It also affects the price of power, availability of tax incentives, and exposure to geographic and geopolitical risks. Despite these complexities and the apparent risks, data center development is accelerating at an unprecedented pace.
“There were 35 GW-scale projects announced in 2024, of which 28 were in U.S. and another 15 or so just below 1 GW in size. There were only three the previous year,” said Colby Cox, managing director for the Americas at DC Byte, whose firm operates a global data center intelligence platform.
In terms of permitted power capacity, colocation providers and hyperscalers added 122 GW globally in 2024, Cox said during a Data Center World session last week. Such robust activity, however, means capacity is at a premium, or completely unavailable in certain markets. Colocation providers and hyperscalers possess the most clout. Others might get squeezed out of certain locations.
Hot New Data Center Markets
Cox suggested alternative markets that are up and coming. Northwest Indiana, for example, had only 213 MW of capacity at the end of 2023. It is now up to 2.4 GW. Similarly, capacity in Pennsylvania soared from 404 MW to 4 GW. Kentucky had 690 MW of growth in the past year, and more is expected. The Kansas City metro exploded with 3 GW of growth in 2024.
In addition, several North Carolina metros have plenty of colocation opportunities. In West Texas, an emerging trend is crypto-mining companies flipping into AI factories. Meanwhile, West Virginia has opened the data center market by making buying and permitting land easier.
“These locations are attractive as they also provide access to energy and fiber connectivity,” said Cox.
Promising Global Data Center Markets
Beyond the U.S., Alberta in Canada moved from 174 MW to 6.2 GW in a year, courtesy of Shark Tank’s Kevin O’Leary announcing the ‘Wonder Valley’ project. That province makes it easy for data centers to become established, thanks to regulatory support, community acceptance, land availability, and power potential.
Already under construction, the off-grid Wonder Valley AI data center should be completed by the end of 2027 for $2 billion. And that’s only the first 1.5 GW phase. Another 6 GW will be added across a 6,000-acre campus.
“Data centers are today’s gold rush,” O’Leary said during his Thursday keynote at Data Center World. “Alberta is the motherload of stranded natural gas in North America, which we are using to power 10 gas turbines we are buying for the site.”
Elsewhere, Vietnam recorded 1 GW of new data center growth last year. Milan, Italy, added more than 1 GW, and Australia opened 4.3 GW of new capacity in 2024.
“New data centers need to have all their ducks in a row,” said Cox. “That means power availability as well as land.”
Tax Incentives and Tariffs
Cox said data centers aren’t likely to find too many tax incentives in the U.S.. Many states are cautious about the possibility of data centers taking power that they might need elsewhere. He recommended that new projects arrange to become symbiotic partners on the grid – similar to Wonder Valley.
“Most facilities operate at 60-70% capacity, and AI factories will have highly variable loads,” said Cox. “Some of that power could be fed to the grid when it needs it.”
As for tariffs, there will be some impact on certain components while the ongoing trade negotiations play out. But there are other tariffs to worry about: those imposed by local utilities.
“Utilities might charge large load tariffs, and that can have a huge impact on where people build,” said Alan Howard, principal analyst at Omdia.
He drew attention to ‘land banking,’ noting that hyperscalers and other data center operators have been buying up vast tracts of potential data center sites, as land is relatively cheap compared to everything else in the data center.
It’s All About Power
Many factors influence data center location, but power dominates them all currently.
“Power availability is the biggest limiting factor in the pace of AI innovation and adoption,” said Vlad Galabov, research director at Omdia’s cloud and data center practice. “AI will drive over 50% of global data center capacity and more than 70% of revenue opportunity, as AI fuels massive productivity gains across all industries.”
The existing power grid, however, can’t cope with AI's demands. According to Omdia, as much as 35 GW of data center power will be self-generated by 2030. Places like Wonder Valley have zeroed in on under-the-radar locations’ vast stranded power assets. To paraphrase an old proverb: “If the power won’t come to the data center, then the data center will go to the power.”
As AI reshapes the digital economy, data center operators face a new imperative: follow the power. Whether in West Texas, Alberta, or Pennsylvania, tomorrow’s AI infrastructure won’t just go where the demand is – it will go where the energy flows and the policies welcome it.
This article was provided by Data Center Knowledge, and written by featured editor, Drew Robb.