As artificial intelligence (AI) continues to surge, Europe’s data centres are facing a growing capacity crisis. Despite plans to expand by 22% in 2025, experts warn that demand will outpace supply, risking Europe’s further delay in the AI race. Analysts at the Kickstart Europe conference on Wednesday highlighted the growing concerns about electric grid congestion and a lack of suitable sites for new data centres, particularly in traditional European hubs like Frankfurt, London, Amsterdam, Paris, and Dublin.
One of the key developments exacerbating this issue is the rise of China’s DeepSeek, which has introduced more energy-efficient AI models. While this development may ease some of the pressure, it does not address Europe’s significant infrastructure constraints.
Major software companies like Google and Amazon are continuing to push ahead with plans for hyperscale data centres, but they, along with European firms, are struggling to find adequate space. “Providers can’t build supply fast enough to keep up with demand,” said Kevin Restivo, director of data centre research at CBRE, during his keynote address.
The shortage is most pronounced in primary data centre locations, but secondary markets like Milan, Warsaw, and Berlin are seeing rapid growth in 2025. Many companies are even looking outside of urban areas to find space. CBRE forecasts that 9.1 gigawatts of new capacity will come online this year, with hyperscalers taking up over a third of it.
However, Europe’s data centre expansion still lags behind U.S. investments, which are seeing massive funding, such as the $500 billion “Stargate” initiative involving Oracle, Microsoft, and OpenAI over the next four years. According to CBRE, the average cost to build data centre space in Europe is 12 million euros per megawatt, suggesting that the European market is expanding by over 100 billion euros this year. Despite this growth, analysts, such as Stijn Grove from the Dutch Data Center Association, warn that Europe risks falling behind in the AI race, becoming technologically dependent on the U.S. and China.