Early AI data center investments target the core, not the edge

Early investments into advanced artificial intelligence (AI) services will be funneled into large data centers and won’t involve edge computing, according to industry executives and analysts. But that may change in the future.

“When we move to the large-scale distribution of the inference [AI] model, that’s when edge becomes important,” Brian Pryor told Light Reading. But that won’t happen anytime soon. “That end of the market is not developed enough,” he said.

Pryor is a managing director at Houlihan Lokey, an investment banking firm with a focus on data centers. He helped spearhead the firm’s early work into the edge computing sector, which is an offshoot of the cloud computing market that so far has failed to develop in the way early edge computing proponents had hoped.

According to Pryor, the current AI boom – which is focused on generative AI services like ChatGPT – will not serve as a catalyst for edge computing. At least, not yet.

“The major investments right now are in the large language learning models,” he said. “That has actually very little to do with edge.”

But Pryor said it’s possible the AI market will spark demand for edge computing services in the future, when those learning models shift to an “inference” model geared toward the speedy delivery of AI capabilities. For example, applications ranging from connected cars or factory floors may eventually benefit from inference-based AI services – and edge computing facilities may play a major role in the delivery of those services in the future.

“That [inference] piece would be much more latency sensitive,” Pryor said, and could therefore require edge infrastructure.

Edge isn’t needed yet

Others largely agree with Pryor’s outlook.

“AI tasks don’t normally have the same latency requirements as many other workloads, enabling hyperscalers to focus AI-oriented investments in their core data centers, which are not located in the usual major economic hubs and metro markets,” said John Dinsdale, an analyst with Synergy Research Group, in response to questions from Light Reading. He said such economic hubs include New York City, Silicon Valley, Chicago and Dallas.

But Dinsdale argued that eventually an edge delivery network could become important for big AI players like Microsoft and Amazon.

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