Analysts: Data Centers in Europe Struggle to Keep Up with Demand

European data centers will increase their capacity by 22 percent this year, but despite this, they will struggle to meet demand, raising the risk of Europe falling behind in the artificial intelligence (AI) market race, analysts say.

Chinese DeepSeek shocked the markets last week by increasing the prospects for more energy-efficient AI models.

It is unlikely that this will resolve major European issues such as electrical grid congestion and the lack of suitable locations for new centers.

Major software companies like Google and Amazon plan to continue with their plans to build “hyperscale” data centers, and European corporations also need more space related to artificial intelligence.

– Service providers cannot create inventory quickly enough to keep up with demand – said Kevin Restivo, director of data center research at consulting firm CBRE, in his speech at the Kickstart Europe conference.

The lack of space is most acutely felt in traditionally large European data centers in Frankfurt, London, Amsterdam, Paris, and Dublin, where electrical grid frameworks limit capacity growth.

As a result, secondary markets across Europe are growing. Milan, Warsaw, and Berlin are expanding the fastest in 2025, but companies are increasingly seeking solutions outside of cities.

CBRE predicts that the capacity available this year – measured in data center operations according to the amount of electricity needed for power – will be around 9.1 gigawatts, with hyperscale data centers accounting for more than a third.

CBRE estimates the average cost of building “colocation” spaces, or spaces rented by large companies, within data centers across Europe at 12 million euros per megawatt.

This implies that the European industry will expand by more than 100 billion euros this year, but this is nothing compared to ongoing U.S. investments, particularly the Stargate initiative, under which Oracle, Microsoft, and OpenAI are expected to spend 500 billion dollars over the next four years.

– Europe risks falling into technological dependency, watching as AI dominance consolidates between the U.S. and China – said Stijn Grove, director of the Dutch Data Center Association.