Where the Internet Physically Lives: A New Era in Data Center Development
In the evolving landscape of the internet’s physical infrastructure, the primary driving force behind data center location is shifting from talent acquisition to energy availability. The largest new data center campuses are now strategically chosen for their access to abundant, affordable energy rather than proximity to a skilled workforce. This change reflects a broader industry trend where electricity has become a pivotal factor in site selection.
Emerging Data Center Hubs: Iowa, Ireland, and Northern Virginia
The cornfields of Iowa, an Irish suburb near Dublin, and Northern Virginia have emerged as significant anchors in the global computing network. These locations are favored not for their proximity to universities or engineering talent but due to their advantageous networking capabilities and, most importantly, their energy profiles.
Power considerations have moved from a secondary concern to a primary constraint, although they don’t overshadow all other factors. Interestingly, one of these regions remains a data center capital despite facing a power shortage rather than enjoying a surplus.
The Old Logic: Infrastructure Followed Talent
Traditionally, technological hubs formed around clusters of talented individuals. The creation of Silicon Valley was spurred by Stanford University’s proximity and a dense pool of engineers. Similarly, Boston’s Route 128 relied on MIT, and Austin drew talent to the University of Texas, benefiting from a lower cost of living. Historically, the presence of a skilled workforce attracted infrastructure, funding, and development.
While this model still holds for the software industry, it no longer applies to data centers. Modern data centers, particularly large campuses, don’t require a significant talent pool. For instance, Virginia, the world’s largest data center market in 2023, supported a relatively modest number of jobs compared to the size of its buildings.
Power as a Constraint
The landscape changed with the advent of energy-intensive artificial intelligence (AI) technologies. AI consumes significantly more electricity than the web services that preceded it, making energy availability the foremost consideration for developers.
The International Energy Agency (IEA) projects that global data center electricity consumption could double from about 415 terawatt hours in 2024 to approximately 945 by 2030, driven primarily by AI. Furthermore, the IEA estimates that AI-driven server energy consumption will increase by around 30% annually, compared to a 9% increase for regular servers.
While these projections are not certainties, they underscore a growing concern. In wealthy nations where electricity demand has remained stable, data centers are expected to account for more than 20% of electricity demand growth by 2030.
Iowa: The Cleanest Case
Iowa exemplifies the concept of “grid safety margin.” The state’s reliance on affordable wind power predates the AI boom. With wind power accounting for approximately 63% of its electricity, Iowa boasts one of the highest shares of renewable energy in the United States. This surplus of low-cost, low-carbon energy, combined with open land and low construction costs, has attracted major tech players.
Companies like Google, Microsoft, Meta, and Apple have established cloud campuses in Iowa, with around 27 facilities either operating or under construction. The attraction is multifaceted: open land, cost-effectiveness, tax incentives, and a surplus of renewable energy. Notably, these companies are not drawn to Iowa for its machine learning PhD programs.
Northern Virginia: A Pioneer Under Pressure
Northern Virginia stands as the largest data center market globally, with approximately 70% of the world’s internet traffic passing through Ashburn’s “Data Center Alley” daily. Its prominence is not due to available electricity but rather its historical accumulation of fiber and internet infrastructure. Each new addition enhances the region’s digital ecosystem.
However, Northern Virginia now faces a reversed “grid safety margin” scenario. Far from having excess capacity, the region is experiencing a shortage. Capacity under construction fell by 29% year-over-year in 2025, even as demand continued to rise, indicating a market reaching its limits.
As a result, nearly two-thirds of new U.S. data center capacity is now being built outside established hubs like Northern Virginia. The region’s status as the world’s largest market owes much to first-mover advantage, but it now contends with constraints that new hubs aim to avoid.
Ireland: When Demand Exceeds Supply
Ireland emerged as a leading data center hub in Europe due to favorable tax policies, transatlantic fiber connections, and significant U.S. platform investments—until its network infrastructure reached capacity. By 2024, data centers consumed around 22% of Ireland’s electricity, a figure projected to rise to 31% by 2034.
Rather than relying on surplus capacity, these data centers strained Ireland’s network to the point that regulators halted new connections. Around Dublin, new data center connections were effectively frozen from 2021 amid warnings of potential power outages. This freeze was only lifted in December 2025, with new rules requiring new installations to source at least 80% of their annual demand from new renewable projects in Ireland. Despite its power grid constraints, Ireland remains a prominent data center hub.
The Evolving Model: A Nuanced Perspective
In examining these three cases, a more nuanced picture emerges. While power is now a critical consideration, it is not the sole determinant. Iowa benefits from tax incentives, land availability, and affordable wind power. Northern Virginia thrives on its fiber and network legacy effects, only now encountering network limitations. Ireland, despite its lack of reserve electricity, achieved its status as a data center capital with a five-year freeze on new connections.
The underlying shift is in priorities. For a generation, developers could take power availability for granted while optimizing for talent, fiber, or incentives. In the era of AI, energy availability has become the primary constraint that can halt a project before any other factors come into play. The Belfer Center notes that AI-driven demand now outpaces available capacity in some regions, leading to project delays and private energy arrangements.
The next iteration of the data center map will be shaped by where the next generation of data centers first comes online. Energy policy now plays a role similar to that of talent policy in the past.
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