Author: Tom Harper
The worldwide growth of artificial intelligence (AI) and cloud computing is driving one of the biggest waves of physical infrastructure investment in decades. Hyperscale data centers are spreading across North America, Europe and Asia as organizations rush to keep up with rising demand for computing power, storage and digital services.
What used to be specialized IT facilities have now become a new type of critical infrastructure. Modern hyperscale campuses can cover hundreds or even thousands of acres, use gigawatts of electricity and involve multi-billion-dollar investments with complex financing, engineering and operational needs.
At the same time, the risks these assets face are changing. Data center development and operations now involve energy infrastructure, global supply chains, advanced computing technology and cybersecurity and demand the financial markets stretch for capacity. The size and speed of investment have created systemic risks that affect the entire lifecycle.
Understanding these interconnected risks has become necessary for developers, operators, investors and insurers alike. The following five risk categories are shaping the future of digital infrastructure.
1. Power availability and energy infrastructure
The grid is the constraint
Nothing defines data center risk today more than power. Historically, the grid — its capacity, reliability and reach — largely determined where data centers could be built, how quickly they could begin operating and whether they could run as planned.
AI-driven workloads require an extraordinary amount of electricity. A single hyperscale campus can demand hundreds of megawatts of capacity, and some of the largest AI clusters under development may eventually approach gigawatt-scale demand.1
Electricity infrastructure has struggled to keep pace. The International Energy Agency (IEA) estimates global electricity consumption from data centers could more than double by 2030, driven largely by AI and high-performance computing.2
Energy strategy has therefore shifted from project input to a central component of risk management and infrastructure planning.
Developers are increasingly pursuing multiple strategies to secure reliable energy supply, including:
- Long-term renewable power purchase agreements
- Dedicated substations and transmission infrastructure
- On-site power generation and microgrids
- Advanced battery storage
- Emerging technologies such as small modular nuclear reactors and even deep borehole reactors
Reliability is just as important as capacity. Data centers support critical digital services, including financial systems, communications networks, cloud platforms and AI applications, where even short disruptions can trigger cascading economic impacts.
From a risk management perspective, power procurement now requires early engagement with utilities, regulators and energy developers, as well as contractual structures that address long-term interconnection uncertainty.
Community and regulatory considerations
Power demand from data centers is also increasingly attracting regulatory and public scrutiny. Communities in many regions have raised concerns about electricity prices, grid capacity and environmental impacts associated with hyperscale development.
These factors introduce additional risks related to permitting, zoning approvals and political acceptance. In some markets, power availability is becoming a policy and community relations challenge that developers must actively manage.
2. Construction scale and project complexity
A new class of infrastructure megaproject
Today's data center campuses bear little resemblance to the facilities built even a decade ago. Hyperscale developments can involve billions of dollars in capital investment, multi-phase construction programs and thousands of workers on site simultaneously.
These projects are often delivered on highly compressed timelines as developers attempt to bring capacity online as quickly as possible to meet tenant demand. In some cases, projects that historically required several years are now expected to reach initial operations within 18 to 24 months.
The combination of unprecedented scale and accelerated timelines is testing traditional construction risk models. Alternatively, the construction insurance pricing for these facilities can be extremely competitive.
Delays can cascade across multiple dimensions of a project:
- Financing structures and capital commitments
- Tenant service agreements
- Delay-in-start-up insurance coverage
- Power procurement and commissioning schedules
When projects slip, the financial consequences can escalate quickly.
Supply chain constraints and equipment lead times
Critical long-lead equipment represents one of the most acute risks during the construction phase. Components such as transformers, switchgear, generators, cooling systems and specialized computing infrastructure are often custom engineered for specific projects.
Global demand for these components has surged alongside the rapid expansion of hyperscale development, creating extended lead times and supply chain bottlenecks.
When equipment is damaged, delayed or unavailable, replacement can take months or even years. For large campuses operating on tight delivery schedules, supply chain disruptions can create significant project delays and financial exposure.3 Creative solutions to equipment lead times are being developed, as ingenuity can be critical to success.
Workforce and contractor capacity
As the data center market expands, new contractors and subcontractors are entering the sector with limited relevant experience. Construction spending in the US surged from $1.8 billion in 2014 to $28.3 billion in 2024, an increase that has stressed the pool of experienced specialists, increased reliance on less-seasoned teams and elevated the risk of faulty craftsmanship and coordination failures.4
Data center projects frequently involve phased handovers in which parts of a campus go live while other phases are still under construction, creating overlap among construction, testing and operations. This blending of construction and operational phases complicates risk allocation, as responsibility for damage, delay and defects can shift across contractors, owners and operators over time.
For developers, success increasingly depends on aligning construction contracts, delay-in-startup coverage and operational-readiness plans with realistic schedules, equipment risk and the realities of phased commissioning.
3. Cooling technology and operational reliability
The thermal challenge of AI infrastructure
AI workloads are pushing computing hardware to unprecedented power densities. Traditional enterprise data centers often operated with rack densities of 10-20 kilowatts, cooled primarily through air-based systems.
AI infrastructure is dramatically changing these requirements. High-performance computing clusters can exceed 80-120 kilowatts per rack, with next-generation architectures expected to push even higher.5
These thermal demands are driving a transition toward liquid-cooling technologies and hybrid cooling architectures capable of managing extreme heat loads.
Cooling systems already account for a considerable portion of a data center's energy consumption and are among the most critical components of operational dependability.
Operational and environmental risk
While liquid cooling technologies offer significant performance advantages, they also introduce new operational and water-related exposures that must be addressed during both planning and insurance stages, such as:
- Coolant leaks damaging high-value computing equipment
- Integration challenges between cooling systems and existing infrastructure
- System failures leading to overheating events
- Water management challenges in environmentally constrained regions
In addition, some immersion-cooling technologies rely on specialized fluids, which raise environmental and regulatory considerations. These exposure profiles call for careful consideration.6
Cooling infrastructure also introduces water dependency. In some designs, a large portion of water withdrawn for cooling operations is lost through evaporation. As computing densities increase, these water requirements can grow significantly, creating both operational vulnerabilities and community relations challenges in water-stressed regions.
The water dependency of data center cooling has prompted regulatory responses globally. Singapore mandates dry cooling for new facilities. The European Union's Energy Efficiency Directive requires performance reporting from 2024 and the implementation of an energy management system by 2026. US facilities face growing community opposition, with data center water use becoming a flashpoint for public concern.7
Reliability and downtime risk
As data centers become more complex and more central to global digital services, the cost of downtime continues to rise. Cooling system failures remain a major contributor to operational interruptions, particularly in high-density environments where thermal margins are extremely narrow.8
For operators, maintaining redundancy, preventive maintenance programs and operational discipline across cooling systems is essential to sustaining service reliability.
4. Cyber and technology infrastructure risk
Expanding attack surfaces
Data centers have always been attractive targets for cyberattacks, but the convergence of cloud computing, artificial intelligence and industrial-scale operational technology (OT) has expanded the threat landscape.
Modern facilities rely on a range of OT systems, including energy management systems, building management systems and industrial control systems to regulate power distribution, temperature control and physical access.
Historically, these systems operated separately from enterprise IT networks. Today, integration between IT and OT environments has increased operational efficiency but also expanded the potential attack surface.
Cyber-physical consequences
Cyber incidents targeting operational technology systems can have direct physical consequences. Attacks that disrupt energy management or cooling infrastructure may result in equipment damage, operational downtime or large-scale service interruptions.
In some scenarios, cyber incidents can simultaneously affect multiple critical systems, disabling both power and cooling functions within a facility.
Regulatory expectations for cyber resilience are also increasing globally. Governments are introducing new frameworks requiring stronger security controls, incident-reporting obligations and reliability planning for operators of critical digital infrastructure.
The human factor
Cybersecurity risks are not solely technical. Many successful cyber incidents originate from compromised credentials, social engineering attacks or insider access.
As facilities become more interconnected, employee training, access management and incident response planning become essential components of cyber resilience.
Organizations that integrate cyber risk management across both IT and operational environments and that invest in personnel capable of managing these multifaceted systems are better positioned to withstand developing threats.
5. Insurance capacity for hyperscale projects
When infrastructure outgrows the insurance market
The transformation of data centers into national-scale infrastructure assets is also reshaping the insurance market.
Hyperscale campuses can represent billions of dollars in concentrated insured value when buildings, electrical systems and computing equipment are combined. In many cases, the total insured value of a single campus can exceed the capacity that individual insurers are willing to deploy.
As a result, insurance programs for large data centers increasingly require complex layered placements involving multiple insurers, specialized engineering analysis and detailed risk modeling.
Aggregation risk and geographic concentration
Insurers are particularly concerned about aggregation risk. Many hyperscale facilities are clustered within a small number of geographic markets, creating the potential for correlated losses from natural catastrophes, grid failures or infrastructure disruptions.
Events affecting a single region, such as severe weather, wildfire or prolonged power outages, could impact multiple facilities simultaneously, generating large aggregate losses for the insurance market.
Coverage complexity across the lifecycle
Insurance programs for data centers must also address multiple stages of the project lifecycle:
- Builders' risk coverage, owner-controlled insurance programs (OCIPs) and contractor-controlled insurance programs (CCIPs) during construction
- Delay-in-start-up protection during commissioning
- Property and business interruption coverage during operations
- Cyber liability and operational technology coverage
- Environmental liability exposures
In addition, emerging solutions such as parametric insurance are increasingly being explored to address risks that may not trigger traditional coverage, including non-damage business interruption or infrastructure disruptions.
For developers and operators, early engagement with risk advisors and insurers can improve both coverage availability and pricing efficiency.
Facilities that demonstrate strong redundancy, robust engineering design and disciplined operational controls are often better positioned to attract insurance capacity on favorable terms.
Managing risk across the digital infrastructure lifecycle
The risks shaping the future of data centers don't operate independently.
Power constraints can delay construction schedules. Construction delays can create delay-in-start-up exposure and compress commissioning timelines. Operational failures in cooling or electrical infrastructure can trigger service interruptions. Cyber incidents can disrupt both digital and physical systems simultaneously.
At the same time, the scale of modern projects is pushing the limits of insurance capacity and risk-transfer mechanisms.
Managing these challenges calls for an integrated approach to risk across the entire lifecycle of digital infrastructure, from site selection and energy strategy to construction oversight, operational resilience, cybersecurity governance and insurance program design.
As global demand for computing infrastructure continues to grow, developers and operators that combine engineering expertise, operational discipline and sophisticated risk management will be best positioned to manage the next phase of data center expansion.
