Why was the spending forecast raised so sharply?

  • BofA expects global data center capital expenditure to rise from about 600 billion dollars in 2025 to nearly 1 trillion dollars in 2026 and about 2.1 trillion dollars in 2028; the 2028 forecast is 122% higher than the 2025 edition. The forecast is based on upward revisions to cloud providers’ capital spending expectations, increased financing for new and existing developers, and a surge in construction starts.
  • A construction cycle of 18–24 months leads BofA to conclude that a significant portion of subsequent spending has already secured financing, permits and contracts. However, the fast-track construction approach depends on land with existing substations or high-voltage facilities and shortens schedules through modularization and overlapping construction with equipment installation.

How much of the budget increase comes from higher costs per megawatt?

  • BofA estimates the average cost of a new data center in the US at about 49 million dollars per megawatt, up 10 million dollars from its previous estimate, mainly driven by higher IT equipment prices; greater infrastructure complexity also raised costs on a comparable basis by 10%–15% year over year. Spending growth therefore reflects both capacity expansion and higher unit costs.
  • IT equipment accounts for 78% of average construction costs, while electrical and cooling equipment account for 5% and 3%, respectively. A pure AI data center requires about 57 million dollars per megawatt; of the roughly 8 million dollars more than an average project, about 7 million dollars comes from IT equipment. This cost basis applies to projects delivered at a scale of at least 50 megawatts and excludes land, utility connections and general site works.

Which equipment will increase or decrease with high-voltage DC?

  • Rising rack power toward the megawatt level is driving a shift to 400-volt or 800-volt DC power supply to reduce conductor use and resistive losses. BofA expects the first power-supply-side cabinets to ship in 2027: AC will initially be converted to DC near the rack, while existing medium-voltage equipment and UPS systems are retained during a gradual transition.
  • A full 800-volt DC architecture would add solid-state transformers, energy storage and liquid-cooled busbars, while reducing low-voltage distribution equipment and simplifying UPS systems. BofA estimates that total electrical equipment value per megawatt would be similar, with opportunities primarily reflecting shifts in product mix and market share.
  • Switching costs limit the pace of adoption: the new equipment ecosystem, technician training and inadequate standards all need to be addressed. Some high-voltage controllers and solid-state circuit breakers can cost 5–10 times as much as low-voltage or mechanical alternatives; the alternative path of conventional transformers plus rectifiers has a more mature supply chain but increases integration complexity and footprint.

Why will wider liquid-cooling adoption still require chillers?

  • BofA notes that investors’ expectations for liquid-cooling penetration remain ahead of actual deployment. Industry estimates show that direct-to-chip cooling’s share of energized IT load rose from about 5%–10% in 2024 to 15%–20% in 2025, and is expected to exceed 30% in 2026; current expansion remains dominated by single-phase liquid cooling.
  • New designs separate high-temperature chip liquid-cooling loops from low-temperature air-cooling loops, allowing the chip side to make greater use of outdoor conditions for heat rejection and reducing the need for mechanical cooling. But networking, storage and power electronics still require low-temperature cooling, so high-temperature liquid cooling reduces the load on chillers without eliminating the facility-wide need for them.

How can suppliers turn demand into revenue?

  • Labor bottlenecks are driving more assembly into factories. BofA focuses on the incremental premium from engineering, integration, assembly and testing: it estimates 2026 modular product revenue at 2 billion–5.1 billion dollars, of which incremental value is only about 500 million–1.8 billion dollars; the remainder includes the value of existing components.
  • Joint design of power supply, cooling and chip architecture makes early R&D participation and system delivery capabilities more important. BofA believes manufacturers that can keep pace with chip architecture and provide both power-supply and cooling solutions are better positioned; companies with only point products may lose share, while faster chip iterations require continued R&D investment.