Is AI the answer for what houses AI?

Data center construction is booming as demand for cloud computing, AI processing, and digital infrastructure skyrockets. With new projects breaking ground across the U.S., the industry is at an inflection point—balancing expansion with rising construction costs, trade tariffs, and sustainability regulations.

Data centers are the backbone of our digital infrastructure, powering everything from cloud computing and AI processing to global communication networks.

As demand for data storage and processing soars, this rapid expansion comes with significant hurdles—rising construction costs, new trade tariffs on critical materials, and imperative sustainability regulations.

The industry now faces a balancing act between expansion, financial feasibility, and compliance with environmental mandates.

The Impact of Tariffs on Data Center Construction

In the first half of 2024, data center construction increased nearly 70 percent; more than 500 megawatts of new data center construction was announced in North America's top markets.

A key challenge for data center developers is the increasing cost of essential building materials due to new tariffs on steel, aluminum, and timber imports from China, Mexico, Canada, and other countries.

These materials are fundamental to data center construction, affecting everything from structural frameworks to cooling enclosures, server racks, and power distribution infrastructure.

How Tariffs Are Affecting Data Centers:

• Steel Price Increases → Higher import duties on Chinese and Mexican steel are driving up costs to construct the steel-framework buildings.

• Aluminum Cost Surge → Key components, such as cooling systems and electrical enclosures, rely on aluminum, making budget planning more difficult and potentially halting construction activity.

• Supply Chain Disruptions → Increased demand for domestic materials leads to longer lead times, potential project delays, and increased financing risks.

For architects and developers, these challenges necessitate cost-efficient material selection while ensuring performance and sustainability standards are met.

Stricter Sustainability Regulations for Data Centers

Despite the political climate and increasing material costs, data centers are continuing to be under pressure to meet sustainability mandates.

Data centers are among the most energy-intensive building types, consuming vast amounts of electricity and water for cooling. They account for roughly 1% of global electricity demand, with some of the largest facilities using as much power as a small city. As a result, regulatory bodies and local governments in key data center hubs—such as Santa Clara, Phoenix, and Northern Virginia—are enforcing stricter zoning laws that require:

Lower embodied carbon materials → Cities and states are setting limits on the embodied carbon of materials used in data center construction. Developers must now consider alternatives such as low-carbon concrete, recycled steel, and sustainable insulation materials to comply with environmental targets.

Energy-efficient mechanical systems → With cooling systems responsible for a significant portion of a data center’s energy consumption, new regulations demand higher efficiency standards. This includes the use of liquid cooling, heat recovery systems, and optimized HVAC designs to minimize operational emissions.

Water conservation strategies → Traditional cooling systems rely heavily on water, leading to high consumption rates in water-scarce regions. Regulations are pushing for air-cooled and closed-loop cooling systems that reduce water use without compromising performance.

Renewable energy integration → Many local governments are requiring new data centers to be powered by renewable energy sources, such as on-site solar panels, battery storage, or direct power purchase agreements (PPAs) with renewable energy providers.

Grid resilience and demand response participation → Some municipalities are enforcing grid-friendly designs that allow data centers to participate in demand response programs, where they can reduce energy use during peak grid demand periods to stabilize the power supply.

As sustainability regulations tighten, data center operators must balance compliance with the financial strain of rising construction costs. This requires innovative solutions in design, material selection, and operational efficiency to meet both cost and environmental benchmarks.

Leveraging AI and Analytics for Cost-Effective, Sustainable Data Centers

With increasing operational costs, sustainability mandates, and supply chain volatility, AI-powered solutions are emerging as crucial tools for optimizing data center performance. These technologies are transforming how data centers operate by enabling real-time analytics, automation, and predictive insights that drive efficiency and sustainability.

With increasing operational costs, sustainability mandates, and supply chain volatility, AI-powered solutions are emerging as crucial tools for optimizing data center performance. AI-driven predictive analytics can:

• Enhance operational efficiency by analyzing power usage patterns, optimizing cooling loads, and predicting maintenance needs to prevent costly downtime.

• Optimize energy consumption by dynamically adjusting server workloads, HVAC systems, and power distribution to reduce carbon emissions and lower operational costs.

• Identify material alternatives by assessing environmental impacts and cost fluctuations, helping to mitigate tariff-related cost surges and maintain compliance with sustainability goals.

• Predict and mitigate supply chain disruptions by tracking trade policies, shipping trends, and material availability, allowing developers to source alternatives before delays impact project timelines.

• Support regulatory compliance by integrating AI-driven modeling to evaluate how design choices align with evolving sustainability mandates and energy efficiency benchmarks.

• Optimize energy consumption to reduce costs and minimize environmental impact.

• Forecast material costs to help mitigate tariff-related price surges.

• Identify supply chain disruptions before they impact project timelines.

These innovations improve operational efficiency and help data centers meet stringent sustainability regulations, reduce embodied carbon, and streamline long-term operational strategies for a more resilient and cost-effective future.

How cove Helps Navigate Compliance and Sustainability Challenges

As data centers face increasing pressures from zoning restrictions, tariff-driven price fluctuations, and evolving sustainability regulations, cove provides architects and developers with data-driven insights to design high-performance, cost-efficient, and compliant facilities.

cove can assist to ensure that designs adhere to the stringent data center compliance standards is crucial for ensuring security, privacy, and operational integrity.

These standards, such as PCI DSS, HIPAA, GDPR, and ISO 27001, define best practices for data security, risk mitigation, and regulatory compliance. Implementing security controls, audits, documentation, and disaster recovery plans not only ensures compliance but also enhances operational efficiency, reduces legal risks, and increases customer trust.

By leveraging AI-powered and expert-verified analytics – paired with our multi-pronged approach to data security, cove streamlines decision-making, ensuring projects stay within budget while meeting sustainability goals.

• Embodied Carbon Services to Identify Material Alternatives → Helps architects select low-carbon materials that comply with regulations and can aid in navigating cost fluctuations due to tariffs and supply chain disruptions.

• Energy Analysis and Compliance for Cost Optimization → Uses advanced modeling to develop energy-efficient data centers, optimizing power usage, cooling strategies, and operational costs over the facility's lifespan.

• Navigating Zoning and Compliance → Ensures projects align with performance benchmarks like ASHRAE, 179D, 2030 DDx, Title 24, CALGreen, COMcheck/REScheck – all the way down to local and federal sustainability mandates, avoiding costly redesigns, permitting issues, and unexpected regulatory hurdles.

• Sustainability Analysis for Informed Decisions → Supports informed decision-making with data-driven insights on embodied carbon, life cycle costs, and performance metrics to meet environmental targets.

With cove, data center projects can achieve sustainability and compliance without sacrificing performance, profitability, or data protection.

Navigating the Future of Data Centers with Smart Solutions

The data center industry is at a crossroads—balancing rapid growth with the financial and regulatory challenges of tariffs, material costs, and sustainability mandates. The solution just may be what the data center is built to hold: AI.

By leveraging AI, predictive analytics, and cove’s expert consulting, architects and developers can navigate these complexities, building smarter, more resilient, and more cost-effective facilities.

As the landscape shifts, the need for integrative solutions has never been greater. By embracing data-driven decision-making, sustainable material choices, and compliance-focused design strategies, the data center industry can forge a path toward a more efficient, cost-effective, and environmentally responsible future.