Dive Brief:
- Cloud’s appetite for infrastructure drove data center component revenues to record highs during the second quarter of the year, according to a Dell’Oro Group report published Wednesday.
- The market for servers and storage systems grew 127% year over year to $54 billion, buoyed by hyperscaler hunger for high-capacity graphics processing units and custom accelerators, the industry market analyst firm said.
- Broad enterprise demand for general-purpose cloud services and CPU compute helped drive the gains, according to Dell’Oro Group Senior Research Director Baron Fung. “Memory and storage drive components for non-AI workloads contributed to this growth as prices rose from last year’s low,” Fung said in the report.
Dive Insight:
Cloud providers are racing to get ahead of anticipated surges in enterprise demand for generative AI services as large language model training continues to devour GPU capacity.
The dynamic is reshaping the contours of hyperscaler infrastructure, reaching the servers, switches and networking equipment — the very guts of the data center.
Dell’Oro Group expects the segment to grow more than 100% this year, after increasing 224% last year. The firm also saw the data center physical infrastructure market, which includes power and cooling resources, accelerate for the first time in more than a year during the quarter.
“Cloud and colocation service providers are rushing to add data center capacity to historically low vacancy rates, with new designs to support higher rack power densities and manage AI workload variability,” Dell’Oro Group Research Director Lucas Beran said in the report.
High-capacity silicon is at the heart of the building boom.
Cloud GPU capacity is mostly spoken for, Nvidia President and CEO Jensen Huang said during an earnings call last month.
“They’re renting capacity to model makers. They’re renting it to start-up companies. And a generative AI company spends the vast majority of their invested capital into infrastructure so that they could use an AI to help them create products,” Huang said.
Nvidia reaped the rewards in revenue growth. The chipmaker reported record quarterly revenue of $30 billion during the three months ending July 28, up 122% from the same period last year.
AMD similarly saw its data center revenues hit a record high of $2.8 billion in Q2, up 115% year over year. More than one-third of the chipmaker’s server segment growth came from enterprises deploying AI hardware in their data centers for the first time, AMD President and CEO Lisa Su said during a July earnings call.
NVIDIA led all vendors in component sales, accounting for nearly half of the market, according to Dell’Oro Group. The firm expects AMD and Intel to gain share as demand for accelerators spills over into next year.
