Are colocation data centers significant in the age of AI? Deluged by news coverage and analyst reports on the hyperscale data center boom, you could easily be misled into thinking colocation data centers are on their way to irrelevance.
On the contrary. Colocation data centers are being built to handle modern workloads, established colocation data centers (carrier hotels) are being retrofitted for interconnection, and many data centers already are fully capable of addressing the requirements of organizations mixing colocation in their hybrid IT infrastructure. And, as we have said in a past blog, colocation data centers can be the “sweet spot” for AI.
So, despite media focus on investments in data centers as large as 20 million square feet and speculation of ocean-based and space-based hyperscale data centers as serious possibilities (!), colocation data centers are anything but irrelevant.
To be sure, as AI, ML and HPC applications continue to proliferate, more landscape-dominating hyperscale data centers will be developed to accommodate extraordinarily powerful GPU clusters.
But many – maybe most – organizations do not need the massive processing capabilities provided by hyperscale data centers to run their businesses. That includes AI workloads, especially when it comes to proprietary LLM training, model tuning and inference.
2026: The “Year of Inference”
In a recent post, VAST Data’s Derrick Harris framed up the state of AI, saying, “Drafting off 2025 as a year of massive investment in AI infrastructure, 2026 is poised to be the year that the business of AI inference kicks into high gear.”
For those organizations, colocation data centers are more appropriate environments for the next step in their digital transformation journey. That’s one reason why the industry is expanding at an impressive pace. As noted in a recent Data Center Magazine article, “The global data center colocation and interconnection market is projected to grow from around $83 billion in 2025 to more than $180 billion by 2032, at an estimated 11.7% CAGR.”
What’s becoming clear is a continuum, with hyperscale, colocation and edge data centers co-existing, and in some cases partnering, to best support multi-cloud, distributed computing. You might be surprised to learn that more than a few hyperscale data center operators, as well as hyperscale customers, are also customers of data centers such as those operated by CoreSite. That coopetition enables enterprises to be both cloud smart and data-center smart.
Given the attention on hyperscale data centers, this seems like an important time to revisit the broad range of capabilities and overall value proposition of colocation data centers.
As shown in Figure 1., there are four basic types of data centers, each designed to serve a specific purpose or type of organization.
In its recent Market Guide for Data Center Colocation, Gartner lays out a number of reasons for organizations and businesses to choose colocation to advance their core operational business as well as to easily and directly connect to the specialized services and capabilities of major cloud providers, hyperscale data centers and neoclouds.
Kicking off the key findings in its Market Guide, Gartner states: “Purpose-built facilities remain essential: Leading data center colocation providers invest in secure, climate-controlled buildings designed specifically for IT workloads, featuring advanced fire suppression, structural reinforcements, and certifications such as leadership in energy and environmental design (LEED), Health Insurance Portability and Accountability Act (HIPAA), and resiliency. As artificial intelligence/machine learning (AI/ML) workloads grow, colocation vendors offer the scale, compliance and technological capabilities that many enterprises cannot achieve independently.”
CoreSite data centers are purpose-built and updated to ensure they can support a variety of IT infrastructures and workloads ranging from the most basic one or two server, straightforward business application deployments to implementations such as STN’s GPU as a Service neocloud (GPU One) featuring:
CoreSite data centers offer immense flexibility, capabilities and benefits that include, but are not limited to:
CoreSite’s 2025 State of the Data Center Report found a decisive shift of AI workloads into colocation data centers, emphasizing that AI is fundamentally reshaping enterprise infrastructure strategies. While an organization in a leading-edge industry sector such as advanced aeronautics, healthcare, medical research, robotics or finance may need to leverage the capabilities of hyperscale data centers for some AI, ML and HPC applications, it and other organizations may find it more practical to run day-to-day business operations on-premises, in colocation, in private clouds or some combination of these.
CoreSite colocation facilities allow organizations to deploy their increasingly hybrid, multi-site IT infrastructures where they can run cost-effectively and securely by delivering a mix of high-performance compute environments with unparalleled interconnectivity, direct cloud on-ramps and robust digital ecosystems.
Know More
The Market Guide for Data Center Colocation from Gartner highlights what matters most when evaluating providers — from reliable space and power to scalability, compliance and connectivity.
We believe CoreSite’s recognition in this comprehensive guide reinforces our role as a trusted partner for today’s IT needs and tomorrow’s innovation.
When you are ready, contact us! We welcome the opportunity to discuss your business and goals, and how CoreSite can help you be a future-ready organization.
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved. Gartner, Market Guide for Data Center Colocation, Ken Rothenberger, September 23, 2025
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.