Equinix bets small-scale data centers will bypass U.S. construction rules

U.S. regulators are currently examining the rapid expansion of artificial intelligence infrastructure. Equinix states that its smaller facility footprint may reduce its exposure to potential construction restrictions.

Cyrus Adaggra, the company’s Asia-Pacific president, told CNBC’s Squawk Box Asia that Equinix typically operates facilities with a capacity of 30 to 60 megawatts. He noted that this size generally falls below the roughly 100-megawatt level targeted by U.S. proposals. Adaggra said this distinction helps the company avoid regulations aimed at larger developments.

His comments follow recent U.S. midterm election results that have heightened concerns about project delays and higher construction costs. A report published Wednesday by BMI, a Fitch Solutions company, found that approximately 53% of projected growth in the U.S. hyperscaler development pipeline is in states where newly elected governors could restrict data center construction. BMI estimated that the effects of these potential rules would become clearer from 2028, as most developments scheduled for 2027 already have commitments in place.

Equinix has increased capital spending to $7 billion from about $2 billion a few years earlier, according to Adaggra. He attributed this shift to stronger customer demand. The company’s annualized gross bookings surpassed $500 million for the first time in the third quarter, representing a 35% increase compared with the same period a year earlier.

Adaggra cited large enterprise customers, including Fortune 500 businesses, as a primary driver of this growth. He stated that Equinix serves roughly 60% of Fortune 500 companies. These businesses are investing in hybrid and multi-cloud infrastructure, network connections, and access to digital infrastructure. Russell Investments separately warned that limits on data center development could increase costs throughout the AI infrastructure supply chain. Slower U.S. construction could also weaken demand for semiconductors and other equipment, affecting suppliers in Asia.

Asia is becoming a major destination for data center investment. Sjoerd Leenart, CEO of JPMorgan’s banking business in Asia Pacific, said on a podcast released Friday that the region is expected to attract the most investment and activity after the United States. He noted that global hyperscalers are seeking Asian locations with sufficient land, electricity, and grid capacity. A Thursday report from Mirae Asset Securities identified South Korea as a potential key location for additional capacity, particularly for operators with secured resources and long-term contracts.

The region faces development obstacles, including electricity availability, grid connections, and equipment delays, according to a Thursday report from WTW. Leenart added that authorities in Thailand and Australia had paused some projects while assessing how data center energy consumption could affect other industries and consumers.