⭐Missed our Webinar on SME & Microcap Investing. Click the Button⭐
Introduction
Data centers are the backbone of today’s digital economy, supporting the storage, processing, and dissemination of vast amounts of data. These facilities are integral to cloud services, AI workloads, corporate IT, and increasingly complex digital ecosystems. The global data center market is rapidly expanding, driven by rising data needs, AI integration, and evolving technologies. Understanding the value chain of a data center is essential for businesses, investors, and service providers to tap into this growing market effectively.
The Data Center Value Chain
The data center value chain encompasses multiple stages, from planning and design to operation and maintenance. It involves a wide array of stakeholders, each contributing to different elements of the ecosystem.
Source: A Primer on Data Centers (publiccomps.com)
⭐Missed our Webinar on SME & Microcap Investing. Click the Button⭐
In this article we will look into the components of the just the data center part of the whole value chains.
Planning and Design
Stakeholders: Engineering firms, architects, and IT infrastructure planners.
Role: Planning and design include conceptualizing the physical layout, optimizing the electrical and cooling requirements, and ensuring scalability for future needs. Engineers plan power consumption, mechanical cooling, fire protection, and security systems.
Key Players: Jacobs Solutions, Fluor, Arcadis.
Construction and Installation
Stakeholders: General contractors, material suppliers, specialty contractors.
Role: Construction firms oversee the physical building of the data center, including managing contractors, procuring materials, and ensuring project deadlines are met.
Key Global Players: Balfour Beatty, Skanska, Turner Construction, HITT.
IT Equipment
Categories: Servers, networking devices, storage solutions.
Role: IT equipment forms the heart of a data center’s infrastructure. Servers process and store data, networking devices ensure communication within the facility and with the outside world, and storage holds vast amounts of data.
Costs: IT equipment is the largest cost component, accounting for nearly 74% of the total expenditure per megawatt.
Key Global Players: Dell Technologies, Hewlett Packard Enterprise (HPE), Cisco, Huawei.
Electrical Infrastructure
Categories: Switchgear, Uninterruptible Power Supplies (UPS), Power Distribution Units (PDUs).
Role: Electrical infrastructure ensures continuous power delivery to servers and IT equipment. UPS systems provide backup power in case of grid failure, and switchgear manages the distribution of electrical power within the facility.
Key Global Players: Schneider Electric, Vertiv, Eaton, ABB.
Cooling and Thermal Management
Categories: Chillers, cooling towers, Computer Room Air Handlers (CRAH), liquid cooling systems.
Role: Managing the heat generated by servers is critical to maintaining operational efficiency and preventing equipment failures. Cooling systems like air conditioners and liquid cooling methods are becoming essential as rack densities and power consumption increase.
Key Global Players: Vertiv, Johnson Controls, Trane, SPX Technologies.
Backup Power
Categories: Generators, fuel storage, automatic transfer switches.
Role: Backup power systems, typically diesel generators, ensure uptime during outages. Data centers often have generator capacity equivalent to their total electrical load to maintain continuous operations.
Key Global Players: Caterpillar, Cummins, Rolls-Royce.
Operations and Maintenance
Stakeholders: Facility managers, IT specialists, and service providers.
Role: Once operational, a data center must be maintained for uptime and efficiency. This involves routine maintenance of IT hardware, electrical systems, and cooling systems. Advanced analytics and AI are increasingly used to optimize performance and predict failures.
Key Global Players: Digital Realty, Equinix, CyrusOne.
⭐Missed our Webinar on SME & Microcap Investing. Click the Button⭐
Cost Breakdown of Building a Data Center
Building a data center is capital-intensive, with costs calculated per megawatt of electrical load. The cost per megawatt can reach approximately $38 million, split across various categories:
Servers (66%): ~$25 million
Networking (10%): ~$3.6 million
Storage (3%): ~$1.2 million
Electrical Infrastructure (5%): ~$1.7 million
Thermal Equipment (4%): ~$1.4 million
Backup Power (2%): ~$600,000
Engineering & Construction (10%): ~$4.1 million
Image: Forecasts for each segment as per BofA
Technological Trends Shaping the Future of Data Centers
AI Integration: AI-driven data centers require higher electrical power and thermal management. AI chips can consume 3-4 times more power than traditional CPUs, pushing advancements in electrical and cooling systems.
Liquid Cooling: Liquid cooling is emerging as a preferred choice for high-density AI workloads, allowing data centers to manage heat more efficiently than traditional air-cooling systems.
Rack Density: Rack densities are increasing, particularly in hyperscale and colocation facilities. These racks can handle up to 107 kW, compared to traditional setups of 10 kW per rack.
Data centers are at the heart of modern technological ecosystems, with their value chain spanning numerous stakeholders and services. From planning and construction to IT infrastructure and thermal management, every step requires careful coordination and investment. As AI workloads and digital ecosystems expand, the value chain will continue to evolve, offering opportunities for innovation and growth in this $215 billion global market.
⭐Interested in SME & Multicap Reports? Click the Button Below⭐
Some Charts of Businesses Listed in India engaged in Data Centers
Note: Nothing mentioned here is a recommendation to buy or sell. It is for educational and illustrative purpose only.
E2E Networks
Anant Raj
D LINK
Black Box
⭐Interested in SME & Multicap Reports? Click the Button Below⭐
Disclaimer
I, Ayush Agrawal, am registered with SEBI as an Individual Research Analyst under the registration number INH000013013, effective September 14, 2023.
I offer paid research services to my clients based on this certification. Opinions expressed otherwise regarding specific securities are not investment advice and shall not be treated as recommendations. Neither I nor my associates/ employees shall be liable for any losses incurred based on such opinions.
Any matter displayed in the content posted here is purely for Illustrative, Knowledge and Informational purposes and shall not be treated as advice or opinion of any kind.
The content presented should not be construed as investment advice.
I or my employees/associates shall not be held liable/responsible in any manner whatsoever for any losses the readers may incur due to acting upon this content.
I make no warranties or guarantees regarding the accuracy, completeness, or timeliness of the information provided.
In no event shall I be liable to any person for any decision made or action taken in reliance upon the information provided by me.
I do not hold any positions in the securities mentioned, nor have I traded in these securities in the past 30 trading days. I also do not plan to trade in the next 5 trading days.
Paid clients receive detailed research reports and detailed analyses on all my research. For stock/company-specific investment recommendations, visit
https://ayushagrawal.in/services to learn about my paid research services.
The information here do not constitute a recommendation to buy/ sell and are for illustrative and for general informational purposes only.
Ayush Agrawal
Research Analyst
SEBI Registration No. INH000013013
First Floor, B.P. Complex, Baldeobagh,
Jabalpur, Madhya Pradesh, 482002
Email: themicrocapinvestor@gmail.com
Number: +91 9425412028
GST Number: 23AHUPA5526E2ZJ
