Navigating Unchartered Waters: Plotting a Bold Course for Digital Infrastructure

Navigating the Storm

As my colleagues, friends, and family, will no doubt confirm, I am fond of an analogy, or two. I do find a good metaphor can be a very effective way of taking complex ideas and relating them to familiar, easier to understand concepts. 

With that in mind, it seems that during the last quarter of the UK fiscal 2024/25 year, the data centre industry, especially in the UK and Europe, has experienced some turbulent, choppy waters. Conditions have, let’s say, been unpredictable at best. Every time I’ve thought we were heading for a period of relative plain sailing - we’ve had a new and dark cloud looming on the horizon. 

And, if I’ve learnt one thing during my time in this industry, it’s that one thing operators, financiers and our sector’s customers don’t like is … uncertainty! 

Digital infrastructure and especially 15-year life cycle data centres are developed, built and operated around one thing over all – the need for reasonable predictability.

Plain Sailing

The last three months, however, have certainly highlighted several positive outcomes. 

The UK data centre sector remains buoyant following its designation as Critical National Infrastructure by a very forward-thinking government; Matt Clifford’s superb AI Opportunities Action Plan was launched, which has focused our thinking as an industry; and as part of that, we have the prospect of much-needed AI Growth Zones developing across the UK – of which I am delighted to share that Kao Data are heavily involved in two major proposals. 

These are excellent initiatives which I am confident will benefit the industry, our users of compute power, and society in general.

Much of this was also set against an industry outlook of soaring AI growth, increasing data centre capacity demand, the evolution of a range of new, innovative AI cloud providers and massive sovereign investment in AI infrastructure such as that announced in France by President Macron. 

Naturally, there is NEVER plain sailing, there are some inherent complexities within these positives, but generally it looked, on the face of it, like the wind was in our sails and the emerging spring sun was on our face as we moved ahead.

The Squalls

However, as I alluded to, there have also been regular squalls to keep our feet moving around on the decks. 

Constant, re-occurring issues around power availability across European FLAP-D markets has caused (and continues to create) challenges for all operators - forcing us to think outside of the box, balance customer demand and look further afield for new sites and partnerships to see us through the storms. 

The growing scarcity of power is pressuring the industry to find viable solutions that support both the expansion of data centres and our sustainability commitments.

Set against this limited power infrastructure, the sheer size and speed of investments from other regions such as the Middle East (investing $100Billion), Asia and the United States (investing $500Billion) has also put significant pressure on the UK and Europe to go further, bigger, riskier, and faster.

DeepSeek burst into our collective views in January and overnight turned the industry on its head. Such was the global shock that a large language model (LLM) could potentially be 30% more efficient than ChatGPT and the prospect of AI performing high-level tasks on mere smartphones was a wake-up call, challenging our conventional business models.

Financial markets shuddered, NVIDIA lost a third of its value, and there was talk within the industry that maybe the era of AI data centres had come to an end before it had really even begun. 

Without a doubt, this episode also made finance teams take a second glance at future projections. People have been so used to seeing a perfectly linear line rising to the right on the proverbial data centre growth chart, the rumour and myth of DeepSeek provided a glimpse into an alternative future.

Finally, as the industry started to re-adjust after Deep Seek’s turbulent arrival, up-stepped President Trump. His new administration has started to flex its muscles providing a clear mandate for US companies to think domestic. 

In our sector this appears to have shown itself as an encouragement for the hyperscale giants to place future large scale generative-AI workloads on American soil. UK, European and Asian operators have seen hyperscale cloud and AI deployments scaled back, or paused and this recalibration has undoubtedly caused the sector to re-address their development roadmaps. One only has to tune into LinkedIn to hear the latest estimations and industry commentary.

So, what does this all signal? 

Well I’ve spoken with industry colleagues in the Netherlands, Spain, Belgium and Germany recently, as well as state side following a busy programme of events that has included PTC Hawaii, Platform UK, KickStart Europe in Amsterdam, TMT Congress in London, and a digital infrastructure roundtable in Barcelona, and everyone has echoed the same mantra – it’s been a tough last few months, now is time to pause, consolidate and re-assess plans across the fiscal 2025/26 year. 

If I were to refer to my sailing analogy, there are many in the industry that are looking for a safe haven or harbour to ride out the geo-political storm, and the reverberations we’re seeing across the sector. 

Or … maybe, just maybe, it’s an opportunity for advance while others retreat?

Looking Forward

So, what are we doing at Kao Data? 

Well, one of my guiding life principles has always been” a ship in a harbour is safe, but that is not what ships are built for.” In fact, they’re designed and engineered for the high seas, and while team Kao may be ‘battening down the hatches’ we’re charting a prudent course forward.

Our approach has always been to be bold, agile, relevant, and different. We understand that navigating the challenges of power shortages, technological disruptions and innovations, let alone geopolitical conjecture, are daunting, yet they are matched by substantial opportunities. 

Since the temporary recalibration from the hyperscalers, we’ve signed two new UK based customers – 20i and Ori; launched the build-out of our new 17.6MW data centre, which is liquid cooling-enabled and purpose-built for industrial-scale AI workloads; and received a multi-megawatt order from a third UK-based customer. 

Consistent quality, timely execution, and delighting our valued customers remain our guiding principles. Our experience and expertise in building data centres at scale, and engineered for AI, combined with our commitment to operational excellence, sustainability, and community support differentiate us from our competitors. And working with an awesome Kao Data team, an ecosystem of genuine partners, and supportive shareholders makes it ALL worthwhile. 

True, outside of the safety of a harbour, this is not a journey for the faint-hearted; it is hard, persistent work that often has repeated short-term setbacks. 

As I often echo our chairman, David Bloom, “Kao Data is an overnight success story 10 years in the making” and throughout 2025/26 we will convert that applied hard work and resilience into continued success for the passengers on board our sturdy ship - our valued customers, the supportive shareholders, and our excellent team.