The data center construction boom – emerging risk trends in the global buildout

The global data center industry is experiencing unprecedented growth, driven largely by artificial intelligence (AI) and cloud computing demands. This expansion presents both significant opportunities and complex challenges for operators, investors, and insurers. 

The heavy computing power required by AI workloads, coupled with growing demand for AI technologies, has sparked a global building boom to construct high-performance facilities and ensure reliable energy sources. A rapid response to the surge in AI and cloud computing implementation could see as much as $7trn spent globally on data centers by 2030. 

Major technology companies (the “hyperscalers” ) are spearheading this expansion. The leading US cloud providers – Amazon, Microsoft, and Google Cloud – accounted for around two thirds of global cloud revenue in Q2 2025. Along with China’s Alibaba, Tencent, and Baidu, they are investing billions into new server farms to support growing digital demand. 

The US invested over $74bn in data center construction in 2024 and remains the dominant market, but growth is worldwide. China is rapidly expanding capacity – Greater Beijing alone accounts for around 10% of global hyperscale capacity, expected to double to over 8GW by 2030. Asia-Pacific had 3.2GW under construction and 13.3GW planned as of early 2025. 

Europe and the broader EMEA market are experiencing a 43% annual increase in pipeline activity, with London and Dublin the largest markets, while in the Middle East, Saudi Arabia’s Public Investment Fund is expanding capacity with the launch of Humain, planning AI factories with hundreds of thousands of Nvidia GPUs (graphics processing units).  

Electricity demand from data centers is expected to more than double by 2030. Aging grid infrastructure, increased power demand, supply chain issues, and lengthy planning processes can delay grid connections, and operators are increasingly looking to generate their own power, including solar, wind, and gas. Major tech companies are even exploring nuclear options. The scale and complexity of on-site power generation introduces complex exposures. 

Half of data centers report experiencing at least one impactful outage in the past three years, many due to power issues (45%). The consequences of outages have intensified with digital dependency, power demand, aging infrastructure, extreme weather events, and geopolitical uncertainty. Cyber-attacks on energy utilities have tripled in the last four years.  

Site design and layout are key to minimizing outage risk, with mitigation measures including separate power supplies and self-generation. “Mirroring”, which replicates data and operations across multiple facilities, offers more comprehensive redundancy.  

The industry faces challenges including tariffs, inflation, permitting delays, and geopolitical instability. Data center demand threatens to outpace the availability of components, skills and labor, while procurement lead times for many components are longer than ever, with new transformers taking at least a year. 

Supply constraints impacting GPUs, essential for AI, pose supply chain risks, especially in regions experiencing geopolitical tensions. Critical mineral demand is also rising and land availability is limited. European and Chinese authorities have implemented measures to manage growth amid community concerns. 

Squeezed timescales and competition for skilled personnel can affect project execution quality, potentially causing disputes and compromising safety. Faulty workmanship and design defects are major causes of construction insurance losses. 

Data centers face resistance from communities worldwide as their footprint expands. Resource-hungry facilities spark tensions over water consumption, infrastructure strain, and environmental impacts. Energy affordability fears are also rising, with wholesale electricity costs reportedly substantially higher near data centers. 

Governments worldwide are implementing frameworks to address environmental impacts and cybersecurity concerns, including the EU Energy Efficiency Directive. In Asia, Singapore unveiled its Green Data Centre Roadmap in 2024, while China’s data center action plan includes boosting renewable energy utilization by 10% annually. The US lacks comprehensive federal regulation, with a patchwork of state and local requirements focusing on environmental impacts and resource usage, particularly water restrictions in drought-prone regions. 

Allianz Commercial construction experts report a significant increase in the number of submissions for data centers in recent years. The complex nature of data center construction and operation requires specialized insurance coverage. Developers need the support of experienced construction underwriters who understand both core building and equipment requirements, as well as expert risk consultants to analyze vulnerabilities, improve resilience, and ensure compliance with evolving regulations.