AI Propels 'Impressive Acceleration' In Cloud Market, Fueling Trillion-Dollar Data Center Spending Spree

Corporate spending on cloud services continues to accelerate, with artificial intelligence alone accounting for around half of the market’s growth. Enterprises’ growing hunger for cloud-based AI computing could push annual data center spending past the trillion-dollar mark within five years. 

Global cloud revenue last year totaled $330B, up $60B from the year before, according to data released last week by Synergy Research Group. The fourth-quarter revenue of $91B was up 22% from the prior year. 

While the cloud market was growing before the launch of ChatGPT kicked off Big Tech’s AI arms race in late 2022, Synergy estimates that generative AI now accounts for roughly half of the sector’s expansion. Corporations are spending big on new generative AI platforms from the major cloud providers, virtual access to high-performance graphics processing units and AI enhancements to existing cloud products. And tech giants are scrambling to build out new data centers fast enough to keep up.

“For such a big market that is an impressive acceleration of growth,” John Dinsdale, chief analyst at Synergy Research Group, said in an email. “How much of that was down to AI? ChatGPT was launched at the end of 2022 and helped to bolster service development through 2023 and then boost more aggressive market growth through 2024.”

The majority of corporate cloud spending still flows to Amazon, Microsoft and Google, the three largest cloud providers, who together control more than 60% of the market and who — along with social media giant Meta — are also the world’s largest data center users.

Amazon leads the pack by a considerable margin with a 30% market share, while Microsoft and Google account for 21% and 12% of global revenue, respectively, according to Synergy. 

Over the past two weeks, the trio of cloud computing behemoths have continued to make big bets that AI-driven cloud growth isn’t slowing anytime soon. Speaking on quarterly earnings calls, leaders at all three firms pledged significant increases in their capital expenditures on data centers and other digital infrastructure needed to support AI. 

Amazon plans to boost capex to $100B in 2025 from $83B last year, a sum driven mainly by AI infrastructure investments for Amazon Web Services that CEO Andy Jassy called a “once-in-a-lifetime opportunity.” Similarly, Google parent Alphabet told investors this week it plans to increase capex from $52.5B to $75B.

Microsoft, whose capex soared last quarter, has indicated it has no plans to slow its AI data center spending. The company reported lower-than-expected cloud revenue, which the firm’s leadership suggested was due to a shortage of data center infrastructure needed to meet specific customers’ AI computing needs. 

“The technology might be expensive, but it is creating new services that are bringing in tens of billions of dollars for the cloud providers,” Dinsdale said.

Data center capex, driven disproportionately by the major cloud providers, could hit $1T annually by 2029, with a compound annual growth rate north of 20%, according to a report published last week by telecom analytics firm Dell’Oro Group.

Just as AI now accounts for around half of all enterprise cloud spending, Dell’Oro Group projects that within five years, nearly 50% of all data center infrastructure spending will be specifically to support AI computing workloads. 

While the three largest cloud providers and Meta dominate the cloud revenue and capex landscape, Synergy and Dell’Oro pointed to significant growth among second- and third-tier providers as well. 

Synergy’s analysis singled out AI-specific cloud startup CoreWeave, which is now among the 20 largest providers by total revenue. The Nvidia-backed firm is considered among the most successful AI startups, landing a $10B contract with Microsoft and raising more than $12.7B in investment over the past year and a half. CoreWeave has been snapping up data center capacity at a frantic clip, with 10 new facilities planned in 2025. 

Oracle, which accounts for just a 3% share of the overall cloud market, has also disproportionately ramped up its data center capex in recent quarters. Dell’Oro Group highlighted the planned $500B Stargate AI data center project in which Oracle is a partner.