Hyperscalers scale up
Dycom’s thesis about the hyperscaler market is supported by forecasts of industry watchers.
New research from Dell’Oro supports Dycom’s thesis. The research group revealed that worldwide data center capex is projected to grow at a 21 percent CAGR. The research firm said that it anticipates the hyperscale cloud service providers to account for half of the $1.2 trillion global data center capex by 2029.
A large portion of capex spending will come from the top four US-based cloud service providers (SPs)—Amazon, Google, Meta, and Microsoft. Dell’Oro said these four companies will make up nearly half of global data center capex in 2025.
“The demand for digital infrastructure that powers the AI revolution continues to grow at an incredible rate,” Peyovich said. “The top hyperscalers have once again collectively raised their capital expenditure expectations for this year and next, driven by significant increases in AI-related investments across the country. The trend is just beginning.”
Fiber infrastructure opportunities
As hyperscalers look to scale their data center footprint, it will drive up power demands.
By 2035, analysts estimate that U.S. power demand from AI data centers will grow more than 30-fold, reaching 123 gigawatts from just 4 gigawatts in 2024. This translates to an estimated $1 trillion or more of investment in U.S. data center infrastructure alone.
However, Peyovich sees an equally large market opportunity to equip these data centers with fiber.
“While a large portion of new investments will go to power infrastructure and the data center buildings themselves, a massive amount of fiber infrastructure will be required,” he said. “This includes connecting new data centers and upgrading existing pathways to meet the current and future needs of AI. Specifically, this means the need for substantial increases in fiber capacity, the build-out of ultra-low latency networks, diverse routing to ensure uptime, and a shift toward building data centers at the edge to support inference and agentic AI.”
A big part of the $20 billion opportunity for Dycom will be new middle mile networks that are being built to support the data center boom.
Take Lumen, for example. To support its growing pipeline of private connectivity fabric (PCF) customers, Lumen is expanding its fiber and optical networking facilities. It is building 119 ILA In-Line amplifier sites. Additionally, it has deployed 1,200 miles of fiber on 16 routes and completed IRU conduit deployments across 55 additional routes.
“We’re looking at route miles across the United States, connecting data center campuses, both long-haul, middle mile, that includes opportunities for new routes includes replacing some existing routes that doesn’t have the capacity, can’t get the latency that’s needed as we continue this AI evolution includes this inside defense work,” Peyovich said. “This is a smaller component of the $20 billion, but that’s included in that number as well. And we really think that that’s conservative, that it’s going to continue to grow.”
However, Peyovich noted that these projects take time to get off the ground because they are run through municipalities that can have complicated permitting. “We’re still very early, but I would really think about those heating up from a contribution standpoint next year,” he said. “And really, 2027 is when we think that a lot of those opportunities are going to come online in a significant way.”
link