With the explosion of AI as driver, hyperscalers and enterprises alike are pivoting from traditional, boxy data centers and sprawling server farms to modular, AI-optimized, and vertically scalable data centers. According to the 2025 Data Center Energy Storage Industry Insights Report, 86% of respondents anticipate a shift toward more customized power solutions to accommodate AI demands.
Construction of data centers has increased more than sevenfold in two years, based on findings from commercial property giant JLL. Rising demand for high-performance compute (HPC) environments, rapid scalability, and energy efficiency is shaping the next generation of infrastructure. Data centers must now balance power, heat, and space constraints while ensuring rapid deployment and cost efficiency. In response, the industry is embracing:
● Modular Configurations for Scalability and Efficiency
● Vertical Expansion in Urban and Suburban Markets
● AI-Driven Cooling and Power Innovations
Modular Configurations: A Scalable Solution for AI
Prefabricated modular data centers (MDCs) are becoming the preferred solution for hyperscalers and enterprises looking to rapidly scale AI workloads. According to the same Energy Storage Industry Insights Report, two-thirds (68%) of respondents use modular power solutions and plan to continue, while 22% deploy them at all locations. Unlike traditional fixed infrastructure, modular components can be preassembled, transported, and deployed quickly, reducing build times while optimizing efficiency.
The Open Compute Project Foundation (OCP) pioneered modular innovation with its Open Rack standard, which expands airflow, optimizes cooling, and increases rack density for AI and cloud workloads. Similarly, Tesla’s Dojo supercomputer is a case study in modular efficiency, with its Training Tile architecture enabling incremental scaling of AI infrastructure.
Meanwhile, the NCAR-Wyoming Supercomputing Center (NWSC) highlights how modularity supports sustainability and energy efficiency. Located in Wyoming, the facility leverages natural cooling and local wind energy, proving that modular designs can drive both performance and environmental responsibility.
Vertical Expansion: The Rise of High-Density Data Centers
The industry is seeing a paradigm shift in data center architecture as rising land costs and urban proximity demands push operators to build vertically rather than horizontally.
Traditionally, data centers have been single-story, sprawling structures, but today, multi-story designs are becoming the norm, especially in high-density metro areas. According to a recent Wall Street Journal report, major operators like Equinix are developing 12-story data centers in Amsterdam and eight- to 10-story facilities across the U.S. to keep infrastructure close to users and reduce latency. Suburban expansion follows a similar trend. Markets like Chicago, Dallas, and Atlanta are seeing a surge in three- to five-story data centers as land scarcity and zoning restrictions drive new designs.
Two- and three-story data centers have become the norm in cities, according to JLL.
AI-Optimized Cooling and Power Infrastructure
AI workloads dramatically increase power density, with racks now exceeding 100kW and generating massive heat loads – far beyond what traditional air cooling can handle. The solution? AI-driven cooling and next-gen power systems.
With air cooling maxing out at 20-30kW per rack, hyperscalers are rapidly adopting liquid cooling to meet AI demands. Companies like Flex and Inspur are leading with direct-to-chip and immersion cooling technologies, ensuring efficient heat dissipation while maximizing compute performance.
Power Innovations: Modular Battery Systems for Cost-Efficient Deployment
Cost-efficient power solutions are a critical component of modular data center growth. In this environment, modular battery cabinets powered by nickel-zinc (NiZn) technology emerge as a cost-effective and scalable alternative to traditional power backup systems.
The total cost of data center buildouts is a key concern, particularly for enterprises looking for scalable power solutions. Modular power units using nickel-zinc-battery-based immediate power technology significantly reduce costs in multiple ways:
● Smaller footprint: Nickel-zinc battery technology is 3x more power dense than VRLA and 2x more power dense than Lithium-ion; therefore, requiring less linear space per module—a savings of up to $10,000 per linear foot.
● Inherent chemistry characteristics: NiZn chemistry is inherently safe at the cell level, as well as non-toxic, and performs well at temperatures up 35 degrees Celsius. With these characteristics NiZn chemistry decreases the need for cooling and fire suppression equipment unlike lithium-ion alternatives.
● Factory-sealed, build-ready design: Unlike lithium-ion batteries, which require on-site installation, NiZn battery cabinets arrive pre-packaged and ready for immediate deployment.
● Lower shipping and installation costs: The modular, plug-and-play design minimizes installation complexity, streamlining data center expansion and upgrades.
By leveraging modular power solutions like NiZn battery cabinets, data center operators can reduce infrastructure costs, accelerate deployment, and enhance overall energy efficiency.
The Future of AI Data Centers: Modular, Vertical, and Sustainable
The rapid evolution of AI, generative workloads, and high-density compute environments is pushing the industry toward highly modular, AI-optimized, and sustainable data center designs. Companies like Equinix, Inspur, and ZincFive are demonstrating how modular configurations, vertical expansion, and AI-driven power solutions can meet the next decade’s infrastructure demands.
