Equinix says its smaller data centers could be less exposed to potential U.S. construction restrictions as regulators scrutinize the rapid buildout of artificial intelligence infrastructure.
The company’s facilities typically range from 30 to 60 megawatts, compared with the roughly 100-megawatt threshold that Cyrus Adaggra, Equinix’s Asia-Pacific president, said is generally targeted by U.S. proposals.
“We will invest in markets where we see customer demand, and because we have a footprint that is typically less than 100 megawatts, we tend not to fall and be caught by the legislation or the regulation, which is typically at about 100 megawatts in the U.S.,” Adaggra told CNBC’s “Squawk Box Asia.”
His comments come as the U.S. midterm election results have heightened concerns that new restrictions on data center development could delay projects and raise construction costs.
About 53% of projected growth in the U.S. hyperscaler development pipeline is concentrated in states where newly elected governors could impose restrictions on data center construction, according to a Wednesday report from BMI, a Fitch Solutions company.
The firm said any impact would likely become more apparent from 2028, as most projects planned for 2027 are already committed.
Demand fuels expansion
Equinix has increased capital spending from about $2 billion a few years ago to $7 billion, driven by growing customer demand, Adaggra said.
“The number one determinant of our capex spend and build is customer demand,” he said.
Annualized gross bookings exceeded $500 million for the first time in the third quarter, up 35% from a year earlier.
Adaggra said growth was driven by demand from large enterprises, including Fortune 500 companies, as businesses invest in hybrid and multi-cloud infrastructure, network connectivity and access to digital infrastructure.
Equinix serves about 60% of Fortune 500 companies, he added.
Potential restrictions on data center development could also raise costs across the AI infrastructure supply chain, according to Russell Investments.
The investment firm also flagged that slower U.S. data center construction could weigh on demand for semiconductors and other infrastructure equipment, including from suppliers across Asia.
Asia gains momentum
Asia is also emerging as a major destination for data center investment.
“After the U.S., we expect actually most data center investments and activity to happen in Asia,” Sjoerd Leenart, CEO of JPMorgan‘s banking business in Asia Pacific, said in a podcast released Friday.
Global hyperscalers are seeking Asian markets with sufficient land, electricity and grid capacity, Leenart said.
Some of that investment could be spread across several markets, according to a Thursday report from Mirae Asset Securities. The brokerage said South Korea could emerge as a key market for additional capacity in Asia, with operators that secure power, land and long-term customer contracts better positioned to expand.
However, Asia faces its own constraints. Power availability, grid connectivity and equipment delays remain as key challenges for data center development, according to a Thursday report from risk advisory and insurance brokerage WTW.
Leenart also pointed to regulatory pushback in Thailand and Australia, where he said authorities had paused some projects to assess the impact of data center energy demand on other industries and consumers.