Capital expenditures on data center construction and expansion continue at a torrid pace in 2026. Following Q1 earnings, most analysts raised their hyperscaler capex spending projections for the year – exceeding the 60+ percent growth rate we witnessed in each of the past two years.
Global data center capital expenditures across hyperscalers, neocloud service providers, and sovereign AI projects are now projected to exceed $1.7 trillion by 2030. In parallel, the transition to so-called 'AI factories' underpinned by accelerated compute processors (XPUs) is increasing connectivity demands between data centers.
A specialized form of data center interconnect (DCI), scale-across networking, has emerged to enable AI and cloud providers to utilize optical connectivity to scale XPU clusters and backend networks beyond the physical limits and power constraints of a single data center.
Building and training advanced large language models often requires months of processing time, despite access to clusters containing hundreds of thousands of XPUs. The race to increase computational parallelism and reduce training times is in full view, with multiple data center projects (including xAI’s announced Colossus expansion into a third data center building in the Memphis area) targeting more than one million XPUs per cluster.
