Artificial intelligence (AI) is fundamentally changing the global data centre industry, with access to electricity replacing fibre connectivity as the most important factor determining where the next generation of data centres will be built.
This is according to the newly-released DC Byte Global Index Report 2026, which assesses and ranks the world's leading and emerging data centre markets, highlighting the factors driving AI-led infrastructure investment, and identifies the opportunities and constraints shaping future growth.
According to the report, for decades, proximity to enterprise customers, internet exchanges and international subsea cables largely dictated where hyperscale data centres were established.
Today, those factors remain important, but they are no longer enough. As AI models become larger and more computationally-intensive, the industry's biggest challenge has shifted from moving data, to securing enough electricity to power the enormous GPU clusters that underpin AI training and inference.
According to the index, markets with reliable power supply, available land and supportive government policies are increasingly outperforming long-established technology hubs that are struggling with grid constraints and lengthy planning processes.
“While demand for AI infrastructure continues to accelerate, data centre operators are increasingly constrained by electricity availability rather than customer demand. Growth is no longer determined by customer appetite alone,” notes the report.
“Potential constraints − such as power availability, grid connection timelines, land access, planning policy, sustainability requirements and community acceptance − are now key factors in which markets can scale and how quickly. In short, we’ve entered an era in which deliverability is just as important as demand.”
In Dublin, for example, the report says the market "is being reshaped by power availability and grid access", with new developments increasingly expected to incorporate self-generation and be located in unconstrained parts of the electricity network.
It notes that planning backlogs and opposition from environmental groups are slowing delivery, prompting hyperscalers to rethink future expansion in Ireland.
Even London, Europe's largest data centre market, is experiencing a shift in priorities.
While demand remains robust, DC Byte says future delivery increasingly depends on supporting infrastructure, such as substations, keeping pace with development.
The report reaches much the same conclusion for the US. “Markets such as Phoenix, which experienced explosive growth during the past few years, are now beginning to encounter the limits of available power and water.
“Rather than simply expanding within traditional technology centres, hyperscale cloud providers are directing billions of dollars towards locations that can provide abundant electricity, large tracts of land and business-friendly regulatory environments. The result is a dramatic reshaping of the global data centre map, with several secondary markets rapidly overtaking long-established hubs.”
Next-gen data centre cities
As power availability becomes the defining factor in data centre investment, a new generation of cities is rapidly emerging as global AI infrastructure hubs, notes the report.
The index shows that hyperscale operators are increasingly selecting markets that can offer abundant land and favourable government policies over traditional data centre locations constrained by ageing grids and lengthy planning processes.
“Cities such as Johor in Malaysia, Melbourne in Australia, and Pittsburgh and Charlotte in the US are attracting significant AI infrastructure investment because they can accommodate the enormous power requirements of next-generation computing.”
Malaysia's Johor is perhaps the clearest example of this transformation. According to DC Byte: "Johor has rapidly evolved from a Singapore 'spillover' location into a standalone hyperscale data centre hub, growing from under 10MW about five years ago, to roughly 1GW in around four years."
The report adds that this rapid expansion "has led to Johor's place at the top of our APAC ranking and its position as the region's leading emerging growth metro".
Australia's Melbourne has undergone a similar evolution. "In the last 12 months, Melbourne has shifted from a secondary Australian data centre market into a major APAC AI hub," says the report.
It adds that this demand "is being driven by hyperscale and AI demand, rather than traditional cloud, leading to hundreds of megawatts of leasing activity, particularly for inference workloads".
South Korea's capital is also experiencing a transformation, although for different reasons. According to DC Byte: "The most important development is decentralisation. Power constraints, land costs and site scarcity are pushing new schemes away from the traditional Seoul clusters into secondary zones and, increasingly, regional markets."
Europe is witnessing a similar decentralisation, it notes.
Africa risks falling behind
Despite Africa's growing digital economy and increasing investment in cloud infrastructure, no African city features among the report's leading data centre markets across North America, Europe or Asia-Pacific.
Instead, investment is increasingly flowing to regions where governments, utilities and regulators are aligning energy policy with AI infrastructure development.
This presents a significant challenge for Africa as AI workloads become more power-intensive.
SA remains the continent's largest and most mature data centre market, with operators such as Teraco, Africa Data Centres, Open Access Data Centres and Digital Parks Africa establishing data centre regions locally, amid huge demand for cloud computing from local firms.
The country also hosts cloud regions from hyperscalers AWS, Microsoft and Google, while investments in new subsea cable systems continue to strengthen international connectivity.
According to a report by Mordor Intelligence, the South African data centre market is estimated at 434.86MW, and is expected to reach 828.93MW by 2029, growing at a compound annual growth rate of 13.77% during the forecast period.
However, the DC Byte report's findings suggest connectivity alone will no longer be enough to secure the next wave of hyperscale AI investment.
It states that for Africa, the implications are significant. Many African governments have unveiled ambitious national AI strategies and digital economy plans, yet little attention has been given to the physical infrastructure required to support AI at scale.
The report stresses that reliable electricity, modern transmission networks, industrial land, water management and streamlined planning approvals are becoming as important as digital policy itself.
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