IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/102368.html

Estimating Aggregate Data Center Investment with Project-level Data

Author

Abstract

Data center investment in the U.S. has increased rapidly in the post-pandemic era, and plans for future investment have surged further. Forecasting investment at such a turning point is an important but potentially fraught exercise, especially given lags in aggregate data availability. We develop a straightforward method to forecast aggregate investment using project-level microdata and a small number of parameters: specifically, abandonment rates, time from planning to start, and time from start to completion. As a key validation of our approach, we generate estimates that match the recent history of aggregate data center investment in the NIPAs. We then use our method to generate nowcasts of aggregate data center investment in the short run, with the mean forecast indicating that investment will increase to $370 billion annualized by 2026:Q2. We can extend our methodology further out, but our forecasts then become conditional on the assumed flow of new data center plans. Assuming future plans range from one-fourth to twice the average pace of plans from 2024-2025 implies a range of investment forecasts of $360 billion to $930 billion in 2027, demonstrating the substantial upside and downside risks to future levels of investment.

Suggested Citation

  • Eirik E. Brandsaas & Daniel I. García & Robert J. Kurtzman & Joseph B. Nichols & Adelia Zytek, 2025. "Estimating Aggregate Data Center Investment with Project-level Data," Finance and Economics Discussion Series 2025-109, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:102368
    DOI: 10.17016/FEDS.2025.109
    as

    Download full text from publisher

    File URL: https://www.federalreserve.gov/econres/feds/files/2025109pap.pdf
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.17016/FEDS.2025.109?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. David Byrne & Carol Corrado & Daniel Sichel, 2020. "The Rise of Cloud Computing: Minding Your Ps, Qs and Ks," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, pages 519-551, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Duso, Tomaso & Schiersch, Alexander, 2025. "Let's switch to the cloud: Cloud usage and its effect on labor productivity," Information Economics and Policy, Elsevier, vol. 70(C).
    2. Ekaterina Prytkova, 2021. "ICT's Wide Web: a System-Level Analysis of ICT's Industrial Diffusion with Algorithmic Links," Jena Economics Research Papers 2021-005, Friedrich-Schiller-University Jena.
    3. Mert Demirer & Diego Jimenez-Hernandez & Dean Li & Sida Peng, 2024. "Data, Privacy Laws and Firm Production: Evidence from the GDPR," Working Paper Series WP 2024-02, Federal Reserve Bank of Chicago.
    4. David M. Byrne & Carol Corrado, 2017. "ICT Services and their Prices: What do they tell us about Productivity and Technology?," Finance and Economics Discussion Series 2017-015, Board of Governors of the Federal Reserve System (U.S.).
    5. Banal-Estanol, Albert & Seldeslachts, Jo & Vives, Xavier, 2022. "Ownership Diversification and Product Market Pricing Incentives," CEPR Discussion Papers 17686, C.E.P.R. Discussion Papers.
    6. Georgios Petropoulos & Thanos Athanasopoulos & Burak Dindaroglu, 2021. "Stability of collusion and quality differentiation- a Nash bargaining approach," Bruegel Working Papers 43226, Bruegel.
    7. Goodridge, Peter & Haskel, Jonathan & Edquist, Harald, 2019. "The economic contribution of the “C” in ICT: Evidence from OECD countries," Journal of Comparative Economics, Elsevier, vol. 47(4), pages 867-880.
    8. Leka, Enxhi, 2022. "What Should Economists Know About the Cloud? A Literature Review on Digital Economics," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265651, International Telecommunications Society (ITS).
    9. Christopher Hooton, 2020. "An Industry-Based Estimation Approach for Measuring the Cloud Economy," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2020-03, Economic Statistics Centre of Excellence (ESCoE).
    10. Cho, Jaehan & DeStefano, Timothy & Kim, Hanhin & Kim, Inchul & Paik, Jin Hyun, 2023. "What's driving the diffusion of next-generation digital technologies?," Technovation, Elsevier, vol. 119(C).
    11. Coyle, Diane & Hampton, Lucy, 2024. "21st century progress in computing," Telecommunications Policy, Elsevier, vol. 48(1).
    12. Bokrantz, Jon & Skoogh, Anders & Berlin, Cecilia & Wuest, Thorsten & Stahre, Johan, 2020. "Smart Maintenance: an empirically grounded conceptualization," International Journal of Production Economics, Elsevier, vol. 223(C).
    13. David M. Byrne, 2022. "The Digital Economy and Productivity," Finance and Economics Discussion Series 2022-038, Board of Governors of the Federal Reserve System (U.S.).
    14. Tomaso Duso & Alexander Schiersch, 2022. "Let's Switch to the Cloud: Cloud Adaption and Its Effect on IT Investment and Productivity," Discussion Papers of DIW Berlin 2017, DIW Berlin, German Institute for Economic Research.
    15. Leonard Nakamura & Jon Samuels & Rachel Soloveichik, 2017. "Measuring the Free Digital Economy within the GDP and Productivity Accounts," BEA Working Papers 0146, Bureau of Economic Analysis.
    16. Gorodnichenko, Yuriy & Talavera, Oleksandr & Vu, Nam, 2021. "Quality and price setting of high-tech goods," Economic Modelling, Elsevier, vol. 98(C), pages 69-85.
    17. Wim Naudé, 2023. "Late industrialisation and global value chains under platform capitalism," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 91-119, March.
    18. Diane Coyle & Wendy Li, 2021. "The Data Economy: Market Size and Global Trade," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2021-09, Economic Statistics Centre of Excellence (ESCoE).
    19. Anderton, Robert & Jarvis, Valerie & Labhard, Vincent & Morgan, Julian & Petroulakis, Filippos & Vivian, Lara, 2020. "Virtually everywhere? Digitalisation and the euro area and EU economies," Occasional Paper Series 244, European Central Bank.

    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:102368. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.