As AI workloads explode, so does the demand for next-gen infrastructure. In the first quarter of 2025, global spending on physical data center infrastructure surged 17% year-over-year, according to a recent report by Dell’Oro Group. Hyperscalers and colocation providers are racing to deploy high-density racks, advanced power systems and liquid cooling to keep up with AI’s huge appetite for compute capacity.
But while the U.S., South Korea and other countries pour billions into AI infrastructure, some nations are falling behind. Australia, for example, risks being left out of the AI infra race. In sharp contrast to Taiwan’s $6.5 billion national AI push, Australia has yet to commit federal funds to sovereign compute or AI data centers. Experts warn this lack of investment threatens national security and economic competitiveness.
Meanwhile, Microsoft is pushing boundaries on sustainability, repurposing waste heat from its data centers to power carbon capture. The company’s new DACinDC pilot is a bold experiment to reduce the carbon footprint of AI itself—turning environmental cost into climate action.
Together, these stories signal a defining moment for the AI infrastructure field: capital, policy and sustainability strategies must now align—or risk falling short in the race to power the future of AI.
AI boom fuels 17% surge in data center infra spend: Dell’Oro
The physical backbone of the AI revolution is growing at a fast pace. According to Dell’Oro Group, the global data center physical infrastructure (DCPI) market surged 17% year-over-year in Q1 2025, marking the fourth straight quarter of double-digit growth, chiefly driven by heavy investment from hyperscalers and colocation providers scaling up to handle massive AI workloads.
Liquid cooling is gaining momentum, with direct liquid cooling revenues more than doubling and projected to top $2.5 billion this year, according to the report. Power distribution remains the fastest-growing segment, especially overhead busways, which expanded by over 40%. Meanwhile, rack power densities are climbing sharply, with 600kW deployments becoming more common and even 1MW being explored.
While all regions posted growth, North America led in terms of expansion with a 23% year-on-year increase. EMEA and China recorded low-teens growth in U.S. dollar terms.
Australia’s lack of AI infra funding poses strategic risk, expert warns
Australia’s failure to invest in sovereign AI infrastructure is becoming a national risk, according to Sue Keay, Director of the UNSW AI Institute and founder of Robotics Australia Group. She warns that unlike countries such as South Korea, Japan, the U.S. and members of the EU, Australia has yet to commit federal funding to national compute facilities or dedicated AI data centers.
“Australia’s ‘relentless determination’ not to invest in sovereign AI infrastructure is clearly a strategic risk that will undermine national security, economic prosperity and create challenges for our society as we lose the ability to control the content we consume,” Keay told W.Media.
The expert also warned that over-reliance on foreign tech companies leaves Australia vulnerable: “We cannot assume in the current geopolitical context that these technology providers will act in our national interest,” she said.
While state governments in Australia have made isolated investments in AI-related infrastructure, Keay argues that national leadership is lacking.
Drawing inspiration from Taiwan, which has committed over AUD10 billion ($6.5 billion) to AI development, Keay argues that “Australia needs to be looking to do the same. We would be alone among developed nations in thinking that we can enter the AI era with zero public investment required.”
Microsoft pilots carbon capture with data center waste heat
Microsoft is trying something new with its waste heat: using it to power Direct Air Capture (DAC) systems that pull carbon from the atmosphere. As detailed in the company’s latest sustainability report, the DACinDC pilot repurposes heat from AI workloads to drive carbon removal processes, using AI to optimize the capture materials and improve efficiency.
Unlike traditional waste heat reuse in district heating systems, this approach sends it directly into DAC systems located onsite at data centers. Microsoft explained that the system can reuse up to 85% of that waste heat. If scaled, this could significantly lower the cost and energy footprint of DAC, which is one of the most expensive forms of carbon removal today.
By integrating DAC with data center infrastructure, Microsoft aims to offset some of the environmental costs of running high-intensity AI workloads and help bring DAC tech closer to commercial viability.
Other stories we’re watching:
In this report, Cushman & Wakefield highlights that the Asia Pacific region is on track to become the world’s largest colocation data center market by 2030, surpassing the United States in both total capacity and rental revenue.
Switch to build AI factories in Las Vegas
SambaNova unveils turnkey AI inference solution for DCs
Empyrion Digital inaugurates AI-driven data center in Seoul
xAI’s head of infrastructure quits
evroc launches ops with sovereign cloud and AI services
Thanks for reading. Stay tuned for more updates on the evolving AI infra space.
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