Equinix sees smaller data centers limiting U.S. regulatory risk as AI buildout faces scrutiny

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Equinix limits AI buildout risk

Highlights

Equinix expects its data centers, typically under 100 megawatts, to avoid most proposed U.S. regulatory restrictions targeting larger facilities.
Equinix's capital expenditure rose from approximately $2 billion to $7 billion, with Q3 annualized gross bookings reaching $500 million, up 35% year-over-year.
Asia is projected to attract significant new data center investment, but power, land, and regulatory constraints could delay development and impact AI infrastructure supply chains.

U.S. policy risk shapes expansion plans

As reported by CNBC, Equinix says its smaller data center footprint could help it avoid proposed U.S. restrictions that are generally aimed at much larger facilities. Cyrus Adaggra, the company’s Asia-Pacific president, said on CNBC’s “Squawk Box Asia” that Equinix continues to invest where customer demand is strongest, while its typical projects tend to fall below the roughly 100-megawatt level he said is often targeted by proposed legislation or regulation in the U.S.

His comments come as U.S. midterm election results heighten concern that new limits on data center development could delay projects and lift construction costs. A Wednesday report from BMI, a Fitch Solutions company, says about 53% of projected growth in the U.S. hyperscaler development pipeline is concentrated in states where newly elected governors could impose restrictions on data center construction, although the firm says the clearest effects are more likely to emerge from 2028 because most projects planned for 2027 are already committed.

Equinix also says customer demand is driving a sharp rise in spending. Adaggra says capital expenditure has increased from about $2 billion a few years ago to $7 billion, while annualized gross bookings topped $500 million for the first time in the third quarter, up 35% from a year earlier, supported by demand from large enterprises investing in hybrid and multi-cloud infrastructure, network connectivity and broader digital infrastructure.

Asia draws investment but faces its own constraints

Beyond the U.S., Asia is emerging as a major destination for new data center investment as global hyperscalers search for markets with enough land, electricity and grid capacity. Sjoerd Leenart, CEO of JPMorgan’s banking business in Asia Pacific, says in a podcast released Friday that most data center investment and activity after the U.S. is expected to happen in Asia.

A Thursday report from Mirae Asset Securities says some of that investment could be spread across several markets, with South Korea potentially emerging as a key market for additional capacity in Asia if operators secure power, land and long-term customer contracts. Still, a Thursday report from WTW says power availability, grid connectivity and equipment delays remain major obstacles to development, while Leenart says authorities in Thailand and Australia have paused some projects to assess how data center energy demand could affect other industries and consumers.

Potential restrictions on development also have wider supply-chain implications. Russell Investments says slower U.S. data center construction could raise costs across AI infrastructure and weigh on demand for semiconductors and other equipment, including products supplied from Asia.

In our earlier article on the growing strain on U.S. AI data center expansion, we covered how higher funding costs, project delays and cancellations, and power constraints are making large buildouts harder to execute. We also noted that weakening investor confidence and local pushback could further slow timelines and raise costs, putting pressure on developers to deliver projects on schedule and within budget.

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