AI hype led to an enterprise datacenter spending binge in 2024 that won't last

Bets on the future demand for AI drove a 48 percent jump in spending on public cloud infrastructure last year, as cloud providers and enterprises both rushed to invest in servers and GPUs to support generative AI workloads.

Statistics from Synergy Research Group indicate the total global splurge on datacenter hardware and software expanded 34 percent year-on-year.

Most of the growth came from the public cloud and hyperscale part of the market, according to Synergy - the 48 percent mentioned. But 2024 also saw an uptick of 21 percent in the enterprise bit barn sector, bucking the trend that has seen relatively low growth here in recent years as corporations invested more and more in cloud services.

No one would previously have imagined the market for datacenter products reaching over $280 billion

In fact, Synergy states that the trend over the past 15 years or so has been for growth in public cloud services to drive higher investment in cloud infrastructure, while constraining what enterprises spent on their own datacenters. While the former has continued, the new market driver for 2024 was generative AI, and this saw both cloud operators and enterprises desperate to get their hands on GPU-equipped servers.

Sing when you're winning

One of the effects of this has been to propel chief GPU maker Nvidia into the upper echelons of the datacenter suppliers, especially to the hyperscale operators. It joined long-standing infrastructure providers such as Inspur and Supermicro, while various "white box" original design manufacturers (ODMs) continued to dominate hyperscale spending.

Excluding ODMs, Dell came out as the overall leader in the server and storage segment revenues, according to Synergy. Dell sunk a lot of effort into chasing the AI market, forming a close relationship with Nvidia and building turnkey infrastructure products around its own servers and Nvidia's GPUs and software.

HPE also features in the top suppliers, following a similar path to Dell, while Cisco is the leader in the networking segment, and Microsoft features prominently due to its position as a server software provider.

• Screwed by the cloud: Hardware vendors looking for that raison d'refresh
• Google offered millions to ally itself with trade body fighting Microsoft
• If the world had a hyperscale datacenter capital, it would be... Northern Virginia
• Cloud growth puts hyperscalers on track to take up 60% of datacenter capacity by 2029

Total infrastructure equipment revenue, including both cloud and non-cloud hardware and software, is expected to top $282 billion for the whole of 2024. This figure is based on actual data for the first three quarters of 2024, plus Synergy's forecast for the final quarter.

"GPUs and generative AI systems lit a fire under the market in 2024, resulting in record growth rates for the industry," said Synergy Research Group Chief Analyst John Dinsdale. He added that no one would previously have imagined the market for datacenter products exceeding $280 billion.

However, Dinsdale suspects this year's wave of enterprise spending isn't likely to reverse the underlying trend towards ever greater investment in cloud services.

"It is good to see the enterprise side of the market growing again, though the long-term trend remains. Ten years ago, sales to public cloud providers accounted for just 20 percent of the market. That rose to 55 percent in 2024, and our forecast shows it reaching almost 65 percent five years from now." ®