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March 3, 2025
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- March 3, 2025
with Taylor St. Germain
DATA CENTERS: GROWTH, CHALLENGES, AND ECONOMIC IMPACT
This week on TrendsTalk, ITR Economist Taylor St. Germain discusses the rapid growth and economic impact of the data center industry. How much challenges such as rising electricity costs affect profitability of this booming sector? Tune in to find out!


MEET YOUR HOST
Taylor St. Germain
As an experienced economist, Taylor St. Germain provides consulting services for small businesses, trade associations, and Fortune 500 companies across a spectrum of industries. His dynamic personality and extensive knowledge of economic trends and their business relevance are highly valued by clients and colleagues alike.
“Join me on the TrendsTalk podcast to explore the world of economics. Episodes offer insightful discussion and expert interviews. We cover relevant economic concepts in an accessible way. Whether you are a curious layperson or an industry professional, TrendsTalk is your go-to source for thought-provoking analysis and a deeper understanding of the economic forces shaping our world.”
Key Episode Takeaways
- 0:09 – Introduction to data center industry growth
- 1:01 – Revenue growth in data processing and housing
- 2:42 – Data center construction trends
- 4:31 – Electricity consumption and cost implications
- 6:15 – Future outlook and challenges ahead
- 7:09 – See Taylor at the ITR Economics Summit on March 20

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.
Taylor St. Germain:
Hi everyone, my name is Taylor St. Germain with ITR Economics and welcome to this edition of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence and today I wanted to talk about data centers.
It’s a question that comes up from almost all of my review calls, presentations. It’s a very hot topic right now and for good reason with the substantial growth that we’re seeing not just here in the US but around the world. So I wanted to provide an update with a few different data points highlighting the strength of this series, but maybe also talking about some of the consequences we’ll deal with as a result of this. Our team, Lyndsay Wornham and Lauren Saidel-Baker, they host By the Numbers and they covered this topic so it certainly suggests that you go check that out as well.
But I wanted to cover in the next five minutes just some highlights from what we’re seeing from this industry. Now the very first data point that I’d like to call out is the revenue that comes from data processing, hosting and any related services that fall into that bucket. This is a Census Bureau series and it’s really focusing on the US. If we look at revenue, again coming from data processing, hosting and the other services that are provided, that revenue number is at about $363 billion right now. It’s a fast growing industry. We have data going all the way back to 2005 for this industry and we focus a lot on 12/12 growth rates at ITR and though this industry goes through cycles from a revenue perspective, we have never seen the annual growth rate cross below zero.
I’m never going to suggest where there’s recession proof industries out there, especially when they’re in the early stages and emerging. But so far, again, going all the way back to 2005, we have seen nothing but growth for the revenue coming from data processing and hosting. And again, that’s a 363 billion dollar industry as we’re sitting here today. If we were to rewind back to 2005, that industry was only 55 billion dollars. So about a 310 billion dollar increase since 2005, certainly a fast growing industry from a revenue perspective.
Now, the main series that we focus on also comes from the Census Bureau and its private data center construction. And if you look at the dollar value of construction, again, as we sit here today, we’re at 28.3 billion dollars going into data center construction. If again just to give you a reference point if we rewind back to 2017 it was a 4.1 billion dollar industry. So we’ve seen an increase of 24 billion dollars really since the the beginning of 2017 it is a fast growing market.
Now this market is slowing down in its pace of growth meaning the 3/12 rate of change and 12/12 rate of change are both declining but they’re still up a positive 55.7 percent on the 12/12 and 47.3 percent on the 3/12. So yes even though the growth rates are slowing down it’s still a very positive industry that’s seen substantial growth. There is a lot of investment here in the U.S. targeting this industry and we’ve seen many of our clients benefit from penetrating this industry especially at a time where other commercial construction markets are a bit weaker. As we’ve talked about on previous episodes of TrendsTalk we’re concerned about some of the commercial construction segments in 2025. Well even though we’re seeing slowing in data center construction it’s likely we still see some very positive growth rates. So this could be an industry that you focus on if you’re in the commercial construction space to mitigate some of the decline you’ll see in some of the other commercial construction segments. It’s a very exciting industry.
Now there are challenges that we’re going to face as a result of all of this data center construction. At the end of 2022 about 1 to 1.3 percent of electricity consumption in the United States was going to data center construction and most forecasts have that value doubling by the end of 2026. And we see that when we compare the data center construction data set on a 12-month moving total you can overlay that with our electric power producer price index so it’s really representing electricity prices. And what you’ll notice if you look at this relationship is that the substantial increase in data center construction correlates with a much more substantial increase in electricity costs as we have really evaluated the last four years.
There’s good news, right? Data center construction is important for the US. It’s important for the growing AI economy. It’s important for the growing Internet of Things economy. But one challenge we are going to have to deal with as a result of this year in the US is the fact that our electricity prices are projected to rise faster than what we’ve been used to over previous decades as a result of the demand from data center construction.
Data center construction, of course, is not the only thing that drives electricity prices higher. We’re seeing a lot more. We’re seeing growing GDP in the US. We’re seeing growing industrial activity over the next five years. So there’s a lot of demand drivers that suggest we’ll be dealing with some higher electricity costs, but data centers is certainly a key component in that.
So, you know, really the takeaway from this data is data centers are a great market, they’re growing market. We haven’t seen much contraction, whether you’re looking at revenue or construction in the data center market, which is very encouraging. But we all better have a plan over the next five years to be ready for a lot higher electricity costs, have a plan to pass along those costs, have a plan to cut costs in other areas of our business, because our bottom lines are going to need it.
The next five years look great from a top line perspective, but with an increasing inflation and an increasing cost like electricity, we are going to need to find a way to offset that. So there’s a lot of excitement around data centers, but there’s going to be some things we’re grappling with here in terms of some unintended consequences of a growing industry like data centers.
Thank you so much for joining me on this episode of TrendsTalk. I want to remind everyone that on March 20th, we will be diving deeper into technology and data centers and the supply chain and the 2030s and what legislation might look like and mean for our forecasts in the future. So we have our March 20th Summit, please head over to our website to check that out. A lot of interesting information coming our way.
Thanks for joining me on this episode of TrendsTalk. I look forward to seeing you all in the next episode of TrendsTalk.