The future of data centres may be smaller, as advancements in on-device AI processing threaten the dominance of massive server farms. Perplexity CEO Aravind Srinivas recently predicted that powerful, personalized AI tools will eventually run directly on consumer devices, potentially rendering large data centres obsolete.

This shift could have significant financial implications for the data centre industry, which has seen massive investment in recent years. While specific revenue figures tied directly to data centres are difficult to isolate, the global data centre market is projected to reach hundreds of billions of dollars in the coming years. A move towards on-device processing could disrupt this growth trajectory, potentially impacting the revenue streams of major players in the data centre construction and maintenance sectors.

The market context is driven by the increasing demand for AI and the associated computational power. Currently, most AI applications rely on transmitting data to and from data centres for processing. However, companies like Apple and Microsoft are already integrating AI processing capabilities directly into their devices. Apple Intelligence, for example, runs some features on specialized chips within its latest products, offering faster performance and enhanced data security. Microsoft's Copilot laptops also feature on-device AI processing.

The development of on-device AI is still in its early stages. The current challenge lies in the fact that AI demands powerful processing capabilities that exceed the capacity of most standard devices. The availability of these features is currently limited to premium-priced gadgets.

Looking ahead, the widespread adoption of on-device AI hinges on technological advancements that can pack more processing power into smaller, more energy-efficient chips. If successful, this trend could reshape the data centre landscape, leading to a more distributed and localized model of AI processing. While large data centres will likely remain relevant for complex AI tasks and data storage, the rise of on-device AI could signal a significant shift in the balance of power, potentially shrinking the need for expansive, centralized facilities.