Our last dispatch from this week’s 2024 RBC Capital Markets Global Communications Infrastructure Conference in Chicago pulls highlights from the event’s penultimate panel: Data Centers & AI: A Multi-Region Perspective. Though many conference-goers had busy travel days ahead, it was still a packed house for this extremely topical discussion.
Panelists:
Maile Kaiser – Chief Revenue Officer, CoreSite
Spencer Mullee – President & Chief Executive Officer, CenterSquare Software LLC.
Scott Schneider – Chief Financial Officer, Cologix, Inc.
Adam Levine – Chief Commercial Officer, Data4 Group
Moderator: Shivek M. Ratnasamy, CFA, RBC Capital Markets
Theme 1: Retail Enterprise Market Now vs. 2023
- Scott Schneider, Cologix – There’s a unique need for direct connectivity to carriers. It’s not about outsourcing. We’re seeing larger and larger deals. So, a deal that was small a year ago is very small today, because deals are only getting larger and larger. Overall, number of deals may not be larger but amount tied to deals are making the deal volume larger overall
- Maille Kaiser, CoreSite – I agree. We’re building out hybrid AI strategy that connects as closely to the cloud as we possibly can. We’ve seen the transition moving along since Covid, and it’s been accelerated by AI, to the point that now, 75% of enterprises are going to build AI themselves.
- Spencer Mullee, Centersquare – We’ve seen a huge increase in demand – bookings are up 300% yr/yr. We don’t do a lot of AI business, but we do see enterprises homing in on specific AI uses/cases like predictive analytics.
- Adam Levine, Data4 – We’re hyperscale focused and started outside CBDs, not interconnectivity hubs. We’re seeing the first wave of AI and ML machine-to-machine now. We’re also seeing GPU/cloud coming in now. This is the enterprises looking to place their own AI modeling inside GPU-as-a-cloud and model their own systems. Overall, it bodes well for the industry.
Theme 2: AI Impact on Colocation Market vs. Hyperscale
- Spencer Mullee, Centersquare – We have 26 customers with 26 AI deployments today. We use our own deployments as well. Enterprises have recently become more interested in it. There’s a need for hybrid situations and that’s really interesting for enterprises.
- Scott Schneider, Cologix – The colocation landscape has changed because of AI. We need to continue to create ecosystems in hotels by selling in the right capacity with the right mix of customers, cross-connects, ARPU. No one has any business having just one customer in a space today. You want 10, 20, 40 customers that all want at least 10 to 12 cross-connects each. We expect cloud and AI will merge at some point because it will largely be the same companies owning both of them. There will be larger need for cloud to be near or on carrier hotel locations. And as AI moves to inference, this will become more prevalent.
- Maille Kaiser, CoreSite – We’re seeing quite a bit of AI demand across many different types of deployments and customers – ML deployments and enterprise AI deployments. Social media uses a lot of AI algorithms. Gaming uses AI algorithms. AI analytics is interconnected with the cloud. Colocation next to cloud makes sense because you own part of the cloud yourself. If data is latency sensitive, you don’t want to be sending it too far. You can grow your footprint yourself without moving too far away from the cloud.
Theme 3: Pressure on Interconnect Trends
- Scott Schneider, Cologix – There is some pressure from companies upgrading gear to reduce their count of cross-connects. That’s been happening for the past few years, but overall, we’re still seeing net new cross-connect adds each month. There’s still so much growth from enterprises and prices increasing across the industry. Equinix has led the practice of always adding new cross-connects at higher prices and everyone else has followed.
- Maille Kaiser, CoreSite – Agreed – customers are always adding size and bandwidth of cross-connects, so you’re always increasing pricing and distribution. We can connect over ethernet now too, so it’s continuing to grow at a healthy pace.
- Spencer Mullee, Centersquare – We’re very happy with our interconnect trends – we’ve seen a 40% increase in business this year and now have 55K cross-connects.
