How AI Is Pushing Cloud Data Center Providers to Scale Up

Cloud service providers continue to be one of the main drivers of the data center industry. Nearly 80 percent of all the capacity under construction in June was already preleased, according to CBRE research, with the majority leased by cloud providers. And with AI gaining ground, demand for cloud infrastructure is through the roof, propelling innovation and generating significant expansion in the data center sector.

Caddis Cloud Solutions is a newly formed advisory firm specializing in data center development, cloud capacity sourcing and end-user deployment. Previously known as CloudSphere Consulting, the company recently launched its new brand under the guidance of Founder & CEO Scott Jarnagin.

With more than 25 years of experience in cloud infrastructure services, Jarnagin has managed projects across various sectors, from data centers to health care and call centers. Now, he’s positioning his company to enter emerging markets and capitalize on the growing need for AI-driven infrastructure.

We asked Jarnagin to expand on how he’s responding to shifts in client demand, considering the growing influence of AI in the cloud landscape.

Today, demand for data centers is at an all-time high. What does it take to stay ahead and deliver on client needs?

Jarnagin: Building strong professional relationships is crucial. Our global presence allows us to identify emerging opportunities and risks, which we leverage to provide our clients with strategic insights that help them stay ahead in a rapidly evolving market. This approach, combined with a deep understanding of each client’s business objectives, growth plans and technology requirements, enables us to provide customized services that align with their unique challenges and goals.

Additionally, familiarity with regional laws and government incentives is essential. We often guide clients to site options that offer significant benefits, such as tax breaks and lower power rates, helping them make informed decisions that maximize their success.

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In what ways is your end-to-end model different?

Jarnagin: What sets us apart is our comprehensive approach to data center development. We collaborate with real estate developers, infrastructure firms, power generation and storage teams, as well as data center operators to enhance cloud capacity. We partner with enterprise companies, hyperscalers and AI/graphical processing units (GPU) infrastructure providers to identify opportunities for expanding cloud capabilities, addressing what’s needed during discovery and building phases, but also considering future requirements.

Speaking of the future, AI is rapidly catching up. How are client demands shifting in relation to this new reality?

Jarnagin: With the rapid growth of AI, we’re seeing a significant increase in demand for data center cloud solutions that support high-performance computing needs. Clients are increasingly seeking solutions that can handle the intense workloads generated by AI applications, and we’re actively adapting our services to meet these evolving requirements, ensuring our clients stay at the forefront of innovation.

This includes integrating advanced cooling solutions specifically designed to address the unique needs of AI and GPU workloads. These new cooling technologies, such as liquid cooling and immersion cooling, are crucial for managing the substantial heat generated by high-performance GPUs, allowing us
to maintain efficiency and reliability in our infrastructure.

How has the data center sector reacted to the high interest rate environment? Are financing deals more difficult to land or is the market somewhat more insulated from other types of real estate?

Jarnagin: The data center sector is somewhat insulated from the broader real estate market due to strong projected growth and sustained customer demand. However, the current environment has prompted investors and financial partners to conduct more rigorous due diligence. They are particularly focused on verifying that utility power is secured and that procurement and construction timelines for
substation builds are realistic and aligned with project demands. Overall, this added scrutiny reflects the unique challenges posed by supply chain constraints and utility power availability.

And power availability remains one of the greatest hurdles when it comes to developing new facilities. How do you tackle this issue with your clients?

Jarnagin: We recognize that power availability is one of the most critical challenges in developing new facilities. To address this, our approach begins with staying at the forefront of technological advancements, ensuring we can offer our clients solutions that enhance both efficiency and sustainability
from the outset. We collaborate closely with our clients during the planning and predevelopment stages, bringing in partnerships that specialize in cutting-edge solutions such as sustainable energy sources, advanced energy storage systems, and even nuclear energy as a viable, low-carbon option for long-term power generation.

Given the significant challenges utilities face today—including increased demand, supply chain constraints and the infrastructure needed to deliver power—we offer alternative power solutions to bridge the gap between utility delivery. These solutions are tailored to regional and infrastructural factors, ensuring they align with the specific needs of the project.

In support and collaboration with local utilities and jurisdictions, we provide a path for multiple power solutions onsite, increasing the capabilities for additional power generation in the long term. This holistic approach includes evaluating whether infrastructure is in place, determining if the utility is open to partnering, assessing the potential for feeding power back to the grid, addressing NIMBY concerns, and ensuring compliance with local regulatory and permitting requirements.

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Could you elaborate on the types of partnerships you’re seeking?

Jarnagin: We are highly strategic in our approach to partnerships. We align with partners who provide solutions that are not only effective today but are also capable of evolving with the rapidly changing demands of the industry, particularly in areas such as power, cooling, design, construction and deployment. Traditional data center solutions for power and cooling don’t always apply in today’s environment. As cloud capacity demands continue to surge, newer, more innovative solutions are essential.

One notable partnership we can speak on is with Ultrascale Digital Infrastructure, an experienced, cutting-edge technology company dedicated to creating advanced, sustainable and customized data center solutions. Together, we are expanding our clients’ access to a comprehensive suite of services, including site master planning, capital partner management, strategic data center development, cloud capacity sourcing, end-user deployment and immersion cooling solutions.

Are you targeting specific markets when building partnerships? Where do you see demand levels providing the most opportunity for you over the next 12 months?

Jarnagin: We are particularly interested in expanding into the traditional real estate sector, where we see immense potential for data center development, especially in light of the current AI boom. By fostering collaboration between traditional real estate companies and data center experts, we believe we can unlock significant opportunities that drive technological advancement and economic growth. Regions like Northern Virginia and the Pacific Northwest, where demand for data center capacity is surging, present some of the most promising opportunities for us over the next 12 months.

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