Emerging markets could be the next major driver of growth for the data center industry, with a development pipeline that is almost two times larger than current global operating capacity, S&P Globa Ratings said in a report on last Friday.
According a report published titled “Opportunity Versus Risk: The Real Decider Of Data Center Growth In Emerging Markets”, growing opposition to data center construction in developed markets is encouraging operators to look further afield for new projects.
This may prove a boon for emerging markets, which stand to benefit from an influx of investment in digital infrastructure.
Yet S&P Global Ratings believes gains are unlikely to be evenly distributed across countries.
“We think both the scale of investment and the facilities themselves will be dependent on supportive policy, access to natural resources, and the provision of infrastructure necessary to support the growing needs of data centers,” it said.
The rating agency expects the conversion of planned projects into operating assets will be uneven, favoring markets with reliable grids, clear permitting processes, access to renewables, and available capital.
It is noted that energy and water constraints are the primary risks to growth, particularly in regional data center hubs where rapid expansion coincides with electricity grid bottlenecks or water stress.
In addition, developers in emerging markets may face growing social risks if data center expansion is perceived to drive up electricity costs, reduce grid reliability, or restrict local access to water and land.
For Asia-Pacific, S&P said the data center expansion is marked by diverging energy profiles.
Rapid growth in markets like Malaysia and India is straining regional grid infrastructure, making the transition to renewables more urgent.
“That said, power availability and grid limitations may push developers toward independent, potentially less clean, power sources to ensure reliability,” it added.
Meanwhile, data center expansion in areas with high water stress–particularly in coastal and industrial hubs–implies a necessary shift toward water-efficient cooling technologies.
As for Middle East, S&P sees a rapid expansion of digital activity is supported by cheap, abundant power but threatened by extreme water scarcity.
The region’s growing supply of solar power supports data center expansion significantly; however, limited access to water and the resulting pressures on energy use pose operational risks.
“Data centers are expanding into even drier areas, meaning the industry faces risks if it does not adopt circular resource technologies, such as solar-powered desalination and advanced closed-loop cooling systems,” it added.
As for Africa, S&P said the region has high growth potential and large amounts of untapped renewable energy.
However, even in areas with plenty of green energy, infrastructure readiness remains a key challenge, it noted.
According to the rating agency, regional data center hubs may have sufficient resources, but unstable power grids may hinder companies’ ability to deliver reliable power without reducing supply to local communities.
“South Africa is a clear example, with growth limited by power availability despite high demand and investment,” it said.
It also said data center operators may need to deploy decentralized, modular energy solutions that can bypass the main grid, while also managing local water use. Although these solutions (for example, use of diesel in Nigeria) could help ensure reliability, they may also slow progress toward cleaner energy systems and decarbonization goals in certain countries.
As for Latin America, S&P said expansion is supported by strong renewable energy generation, but the region still faces transmission bottlenecks and resource management issues.
Data centers often cluster in specific regions, increasing the risk of transmission congestion and localized water stress, it noted.
“Long-term data center expansion in Latin American markets will depend on connecting remote, renewable resource-rich zones to these digital hubs through high-voltage interconnections, while implementing cooling strategies to protect local water supply and ecosystems,” it added.