The boom in the use of artificial intelligence is coming with a surge in the construction of data centres, but there are concerns it is creating a building bubble.

Insurer Allianz revealed the heavy computing power required by AI workloads, and the growing global demand for AI technologies, has seen a building boom take place around the world as developers scramble to build the facilities required to meet these needs.

According to market research, up to $7 trillion will be spent on data centres by 2030 – a sum driven largely by technology companies in the US and China, while Europe lags a few paces behind.

The tech industry’s big three, Amazon, Microsoft and Google Cloud, accounted for almost two-thirds of global cloud revenue in Q2 2025. Combined with Chinese companies such as Alibaba and Tencent, their capital expenditure budgets for 2025 reach hundreds of billions of US dollars, much of it geared towards the industrial scale infrastructure and dependable energy sources that high-performance AI and cloud computing now demands.

The latest Allianz Commercial report, The Data Centre Construction Boom, examined the extent of this global buildout and also questions whether the building bonanza can last.

It cautions despite the ongoing expansion, several factors could limit future growth, including the surging costs of construction. These have escalated dramatically from $200-$300 million, to projects exceeding $20 billion.

According to Allianz Commercial construction experts, average-sized facilities now cost between $500 million and $2 billion. Along with higher construction prices, the complex nature of data centre construction and operation requires specialised insurance coverage for risks such as power supply concerns, faulty workmanship, fire or natural catastrophes.

“Construction projects as complex and extensive as data centres require significant time and resources. Typically, they require project-specific policies given their size and their unique risk profile that demands specialized insurance,” said Darren Tasker, head of Construction, Americas, at Allianz Commercial.

“The bigger data centres have a huge footprint,” added Chris Fancher, US head of Construction Property at Allianz Commercial. “The scale of a $20 billion+ facility can involve tens of thousands of workers on site at peak times, with significant equipment and building supplies moving in and out, timings can be tight. This requires expert coordination, as any missteps or faulty workmanship can lead to potential losses or costly delays.”

The insurer added building a data centre is a complex, multi-disciplinary undertaking, which presents a multitude of risks.

One of the main issues is the soaring power demand that threatens to outpace grid capacity and infrastructure. The electricity demand from data centres worldwide is set to more than double by 2030, to around 945Twh.

The figure is slightly more than the consumption of the whole of Japan today, with its population of 124 million. To avoid power issues, which are the main source of impactful outages with 45%, data centre operators are increasingly seeking to reduce their reliance on the grid by generating their own power on site, including renewables, gas, and even potentially small nuclear reactors.

Fire, heat and water are also significant risks for data centres, potentially leading to severe property damage or business interruption losses.

Lithium-ion batteries are increasingly being used in server racks in data halls. The fire risk associated with these batteries is well documented, particularly in relation to electric vehicles and charging infrastructure.

“Large data centres can consume up to 19 million litres of water a day, equivalent to the water use of a town with a population of up to 50,000,” the study explained. “Increasing cooling requirements will drive up water and electricity demand, while rising global temperatures pose a growing risk to the resilience of over half the world’s top data centre hubs.

“This has altered the risk profile of data centres and contributed to the increase in construction and insurance costs.”

Tasker concluded: “Currently, there are no clear signs the growth in data centres has reached its peak, but there could be a check on the industry’s upward trajectory. Future demand for AI is difficult to gauge, due to rapid technological advances and various barriers to widescale roll-out. This has led some commentators to voice fears about a bubble, over-investment, and the prospect of stranded assets.”

According to Allianz Commercial construction experts, average-sized facilities now cost between $500 million and $2 billion. Along with higher construction prices, the complex nature of data centre construction and operation requires specialised insurance coverage for risks such as power supply concerns, faulty workmanship, fire or natural catastrophes.