“Big beautiful data centers”: How AI and infrastructure are breathing new life into a struggling construction sector

The EMEA (Europe, Middle East, Africa) pipeline jumped +43% year-on-year to reach nearly 14 GW in the planning pipeline by mid-2025 (equivalent to approximately €170 billion in construction spending), and China’s IT load is expected to double from 4,3 GW in 2025 to over 8 GW by 2030, representing an additional $40 billion in construction spending. However, this breakneck pace of growth could collapse if power shortages, land scarcity, and regulatory moratoria are not addressed.

AI and infrastructure are supporting the US construction sector despite the challenges in the residential market. Over the past two years, the US has spent an average of $2,4 billion per month building communications networks, a 25% increase over the two years prior to ChatGPT's release. Looking ahead to 2026, this pace is unlikely to slow, given the continued enthusiasm for AI. However, residential construction is hampered by affordability: with mortgage rates still high at nearly 6%, building permits are down 11% in the past 12 months compared to the previous year. After falling below 1,5 million in 2025, the number of completed housing units could rise to 1,5-1,6 million units per year by 2026, but will not exceed the 2024 record. Overall, restrictive immigration policy is also weighing on the sector in the United States, as the labor shortage remains severe and pushes up wages.

At the same time, the European real estate market is expected to rebound, with Germany leading the infrastructure push. The slowdown in the real estate market between 2022 and 2024 is giving way to stabilization in Europe, and some countries are even experiencing a rebound. In Sweden, for example, housing starts increased by +12% year-on-year in the first half of 2025 (-55% in 2023). However, output growth in the non-residential construction sector is sluggish in the region and is expected to remain below +2% annually, even though logistics and commercial building renovations are favorable. Output in the infrastructure sector has been the stabilizer in Europe, but growth could slow to +1-2% per year by 2026-2027 due to budget constraints. Germany alone could see stronger momentum in 2026, thanks to its €500 billion special infrastructure fund.

In China, the infrastructure action plan may prove insufficient to offset the ongoing housing crisis. The slowdown in the real estate market remains a drag in China, with residential construction expected to remain stable or contract through 2025. Construction growth is being driven by infrastructure: local governments have issued record bonds to support the expansion of high-speed rail and subway networks, but overall growth has moderated. Beijing has prioritized major infrastructure since 2023, starting with roads (2.8 trillion yuan in 2023), followed by renewable energy ($1.1 trillion in 2024). So far in 2025, railway construction has been the fastest-growing segment. Overall, Chinese construction output is expected to grow by +3,2% in 2025 and by around +3,5% per year between 2026 and 2027, well below the double-digit rates seen in the past, but still substantial.

Persistently high input costs and interest rates are challenging businesses around the world. US construction input prices rose 2,3% year-on-year in August 2025, with metals and concrete remaining 40% above 2020 levels. In Europe, construction bankruptcies increased by more than 10% in markets such as France (+10%) and Belgium (+12%). Smaller developers and subcontractors are most at risk, while larger contractors are shifting to infrastructure and industrial projects and diversifying into data centers.

Tribune by Ano Kuhanathan, Head of Sector Research at Allianz Trade (LinkedIn).