Analysis The landscape of cloud infrastructure is experiencing a revolution as service providers rush to deploy AI model training servers, often delaying the usual refresh cycle for standard server hardware. This surge in generative AI technology has shifted the priorities of many cloud providers, with reports projecting a 30 percent increase in capital expenditure on cloud datacenter infrastructure this year.
In fact, according to Vlad Galabov, head of Cloud and Datacenter Research at Omdia, these estimates may already be outdated. Some cloud service providers are considering raising their capex even higher than previously forecasted, leading to unprecedented levels of investment.
The current projection by Omdia suggests that AI servers will account for more than half of the overall server capex this year, with estimates reaching 66 percent. Galabov describes this trend as extraordinary, emphasizing that an additional $10 billion has been added to their previous spending forecast.
Despite the significant investment in AI-capable hardware, these systems only constitute 19 percent of server shipments in cloud datacenters, highlighting the high cost associated with these GPU-packed servers.
Notably, the major cloud players are actively consolidating their non-AI server infrastructure to reduce costs, exemplified by Google’s optimization of video processing servers with custom processors like the Video Encoding Unit (VCU).
This optimization trend is expected to expand to other applications like database and networking infrastructure, reflecting a broader industry shift towards efficiency and cost-effectiveness.
Meanwhile, the move towards right-sizing resources and adopting “cloud smart” strategies is gaining momentum as enterprises seek to optimize their IT operations.
Galabov predicts that enterprises will increasingly turn to IT-as-a-service platforms like Dell Apex or HPE Greenlake for their computing needs, combining the benefits of public cloud services with in-house control and management.
While cloud infrastructure spending continues to grow, with the big three cloud operators dominating the market, emerging players are showing strong growth rates and posing challenges to the established giants. This dynamic landscape is pushing the industry towards greater innovation and competition, ensuring that cloud technology remains a vital part of the future.
