Key Takeaways
- Data centre construction costs typically range from USD 600 to USD 1,100 per square foot, with power and cooling infrastructure being the largest expense, accounting for approximately 30% of the total budget.
- The cost per megawatt is a key industry benchmark, with hyperscale facilities achieving figures as low as USD 3.6 million to USD 6 million, a significant reduction from the broader industry average of USD 8 million to USD 12 million in 2023.
- The market is experiencing substantial growth, driven by AI and cloud computing, with global capital expenditure reaching USD 250 billion in 2024.
- Regional disparities are significant, with North American builds costing more due to land and labour, while Tier IV facilities command a 20-30% premium over Tier III for enhanced redundancy.
The construction of data centres represents a critical yet capital-intensive pillar of the global digital economy, with costs increasingly dominated by power and cooling infrastructure amid surging demand for artificial intelligence and cloud computing capabilities. As of 29 July 2025, industry estimates indicate that these facilities can require investments ranging from USD 600 to USD 1,100 per square foot, reflecting the intricate balance of technological and operational demands.
Key Components Driving Data Centre Construction Costs
Data centre builds encompass a variety of sub-assemblies, each contributing to the overall expenditure in distinct proportions. Recent analyses highlight that power and cooling systems often account for the largest share, typically around 30% of total costs, due to the need for robust electrical grids, uninterruptible power supplies, and advanced HVAC systems to manage heat dissipation from high-density computing equipment. This is followed closely by servers and IT equipment at approximately 28%, encompassing processors, memory, and related hardware essential for computational workloads.
Network equipment, vital for data transmission and connectivity, constitutes about 15% of the budget, including switches, routers, and cabling infrastructure. Storage devices make up roughly 10%, while other elements such as building construction, security systems, and miscellaneous fittings account for the remaining portions, often around 17% in aggregate. These breakdowns are derived from industry reports and vary by scale, with hyperscale facilities achieving efficiencies that reduce per-megawatt costs to as low as USD 3.6 million in optimised scenarios.
Cost per Megawatt Benchmarks
A useful metric for evaluating data centre economics is the cost per megawatt of power capacity. As of mid-2025, experienced builders report achieving costs of USD 6 million per megawatt for hyperscale projects, with top performers dipping to USD 3.6 million through modular designs and supply chain optimisations. This compares to broader industry averages of USD 8 million to USD 12 million per megawatt in 2023, illustrating a trend towards cost compression driven by technological advancements and economies of scale.
| Component | Estimated Cost Share (%) | Average Cost per MW (USD millions, 2025) |
|---|---|---|
| Power and Cooling Systems | 30 | 1.8 – 3.3 |
| Servers and IT Equipment | 28 | 1.7 – 3.1 |
| Network Equipment | 15 | 0.9 – 1.8 |
| Storage Devices | 10 | 0.6 – 1.2 |
| Other (Building, Security, etc.) | 17 | 1.0 – 2.0 |
The table above summarises typical cost distributions based on data from specialised advisory firms, adjusted for 2025 market conditions. These figures assume a baseline hyperscale facility with 100 megawatts of capacity, where total build costs might range from USD 360 million to USD 600 million.
Economic Context and Market Trends
The data centre sector has experienced rapid expansion, propelled by the proliferation of AI workloads and cloud services. Global capital expenditure on data centres reached USD 250 billion in 2024, up from USD 150 billion in 2020, according to market intelligence from S&P Global. This growth is particularly evident in the revenue trajectories of key players. For instance, Nvidia’s data centre segment generated USD 39.1 billion in the quarter ending April 2025 (Q1 fiscal 2026, February-April), a stark increase from USD 968 million in January 2020, underscoring the hardware demands fuelling infrastructure investments.
Comparatively, AMD reported data centre revenue of USD 3.9 billion in Q4 2024 (October-December), up from USD 1.2 billion in Q4 2021, while Intel’s figures declined to USD 3.4 billion from USD 6.4 billion over the same period. These shifts highlight a competitive landscape where efficient cost management in builds can provide a strategic edge, especially as energy costs rise. Power consumption alone can add USD 0.5 million to USD 1 million annually per megawatt in operational expenses, based on utility rates as of July 2025.
Regional and Tier Variations
Costs are not uniform; regional factors play a significant role. In North America, land and labour expenses inflate builds to USD 1,100 per square foot on average, per BlueCap Economic Advisors’ June 2025 report, compared to USD 800 in parts of Europe and Asia. Tier classifications further influence budgets: Tier IV facilities, with full redundancy, can cost 20-30% more than Tier III due to duplicated systems in power and cooling.
Forward-looking projections suggest that by 2030, total data centre construction spending could exceed USD 500 billion annually, driven by AI’s computational needs. Analyst guidance from FactSet indicates a compound annual growth rate of 15% for the sector through 2028, with cost efficiencies potentially reducing per-megawatt figures by 10-15% through innovations like liquid cooling, which can lower cooling expenses by up to 40% compared to traditional air-based systems.
Investment Implications
For investors, understanding these cost structures is essential when evaluating companies in the data centre ecosystem. Firms specialising in power systems, such as those providing generators and transformers, stand to benefit from the 30% allocation, while server manufacturers like Nvidia and AMD capture the IT equipment share. Network equipment providers, including Cisco and Arista Networks, align with the 15% segment, where market growth is projected at 14.9% CAGR through 2032, per Stratview Research’s July 2025 assessment.
However, risks abound, including supply chain disruptions and regulatory pressures on energy usage. Sentiment from verified financial accounts on platforms like X, as captured in semantic searches up to 29 July 2025, reflects optimism around cost reductions in AI-optimised chips, with mentions of up to 30% grid demand savings in new designs, though such claims warrant scrutiny against verified filings.
In summary, the cost breakdown of data centre builds reveals a sector where power and cooling dominate expenditures, yet innovations promise greater efficiency. As demand escalates, precise budgeting and technological integration will determine competitive viability.
References
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Nvidia Corporation. (2025, May). Quarterly Earnings Release (Q1 FY2026). Nvidia Investor Relations. Retrieved from https://investor.nvidia.com
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