Control over data is becoming the defining power struggle of our time. The global data center market was valued at more than $347 billion in 2024 and is projected to grow to over $652 billion by 2030. Nations are no longer debating whether they need sovereign data centers, but are racing to build them. The battle isn’t just about privacy or cybersecurity. It’s about who controls the lifeblood of the digital economy, and who profits as artificial intelligence remakes business, government and society.
The era of borderless cloud computing is ending. In its place, a new system is emerging: “sovereign IT” and “sovereign A.I.” This refers to the ability to manage IT systems and data, including emerging A.I. models and operations, within closed jurisdictional boundaries defined by organizations and national or regional governments. The goals are lofty: ensuring data security and protection, maintaining independence and control over systems, safeguarding national sovereignty and advancing economic interests. Yet with these ambitions comes a collision of politics, economics and technology that could redraw the global map of power.
America vs. Europe
In July, the United States unveiled its AI Action Plan, and the message from Washington was clear: an age of less regulation that promotes A.I. innovation and national competitiveness is the priority. This approach emphasizes the rapid buildout of data centers and the underlying data infrastructure, as well as the removal of compliance requirements. It stands in direct contrast to the European Union, which has spent years crafting the AI Act, the world’s most rigorous regulatory framework for A.I.
These models are set to collide. Europe is betting on strict sovereignty, forcing data to stay within national or regional borders and mandating guardrails for every stage of the A.I. lifecycle. America is betting that looser rules will accelerate adoption and keep U.S. firms in the global lead. What do the early results say? The U.S. data center market will be valued at over $171 billion in 2025, a number Europe isn’t projected to reach until 2030.
The rest of the world is watching closely. Gulf states, India and Japan are already striking out on their own, making massive investments in national A.I. clouds and “sovereign digital sandboxes,” while others are deciding which approach to follow. The risk is a fragmented global landscape and an expanding digital divide: wealthy nations will build sovereign data fortresses, while poorer nations may depend on imported solutions they cannot afford or control.
Why this matters now
The urgency is not theoretical. Artificial intelligence is fueling an explosion in data: massive volumes generated, processed and stored in every corner of the world. Every dataset represents both opportunity and a risk. Whoever owns it can train better models and drive better outcomes. Whoever loses it can struggle with inferior outputs or suffer national security breaches, corporate espionage or worse. Add the looming specter of quantum computing, and the stakes are even higher. Effective data governance—controlling where data lives and how it moves and is used—has far-reaching implications. Data sovereignty is no longer a nice-to-have. It is an existential requirement.
Gartner estimates that by 2028, nearly two-thirds of governments will enforce technical sovereignty rules. Sovereignty is no longer just about security. It is about survival in the global economy.
The old playbook won’t work
For the past decade, businesses and governments outsourced their digital backbone to hyperscale cloud providers. Amazon, Microsoft and Google built huge global networks, and offered cheap, on-demand computing power. This system thrived on scale and centralization.
Sovereign IT is disrupting that model. Regulatory requirements and local security needs now demand that sensitive data be stored locally, processed locally and often owned or controlled by local players. Open-source A.I. models, like China’s DeepSeek, are lowering the barrier to entry. Governments themselves are entering the data center business, funding sovereign A.I. hubs with billions in state capital.
Yet governments have often struggled to keep pace with technology. Global players are accustomed to a patchwork of broad piecemeal rules that differ not only by region but by state or town. To U.S. companies, federal deregulation slams into increasingly complex state-level mandates, establishing an abysmal compliance situation. And globally, compliance often means adhering to data use rules that have been set in some other part of the world, well beyond local government jurisdiction. For smaller regional players, the economics barely add up, yet governments expect them to deliver sovereign-grade performance.
A clear analogy is the case of GDPR, where the end users were empowered (and rightly so). Still, the heavy costs borne by businesses—especially small businesses—resulted in a more concentrated digital market that benefited larger companies. Not only is the environment complex, but it becomes a free-for-all where, acting alone, each company’s actions can create more complexity, more cost, more chaos.
A smarter approach
The challenge is global. Solutions cannot be purely local. New frameworks—crafted by governments, industry leaders and players across the ecosystem—are essential.
Governments must resist the temptation to over-regulate or under-regulate. Too much control will suffocate innovation. Too little will create a Wild West of noncompliance and escalating costs. The smart path is balance: set clear guardrails, incentivize secure growth and partner with industry in genuine public-private collaboration. Smaller nations should band together, regionally or globally, if they want to remain relevant. The emergence of global best practices that can drive broad, regionally consistent approaches has become an absolute necessity.
For businesses, the message is blunt: build a cohesive sovereign A.I. strategy or be left behind. That means:
- Designing infrastructure flexible enough to meet different local rules. Emphasize hybrid approaches that effectively straddle the needs of closed, private environments versus public clouds.
- Prioritizing customer experience and returns. Sovereignty can kill profitability or growth, or both, if over-engineered or handled poorly.
- Building aligned ecosystems. Strategic relationships across the value chain, especially in key areas where shifts in value capture and global vs. local dynamics will alter balances of power. Strengthen alliances with regional players, partnerships with governments and networks that create trust as well as compliance.
- The winners will not be those who move the fastest, but those who move the smartest. Pilot local programs, learn from them, then scale. Don’t jump into sovereignty blind.
What leaders must do now
The clock is ticking. Here are the immediate steps decision-makers should take:
- Get educated. Sovereignty spans technology, politics, economics and strategy, and the implications are long-term. Executives must gain a thorough understanding of regulatory trends and value chain dynamics, not just the product specs. And if you’re still defining your selling motions and ecosystems based on how things worked in the last ten years, know that you’re already behind.
- Study the first movers. Europe, India, the Middle East and Japan are already experimenting with sovereign IT. Their successes and failures will set the templates for everyone else. Learn now, or pay later for the business and technical ‘debt’ you incur.
- Invest today in data governance, resiliency and security. These are universal requirements, no matter how sovereignty rules shake out.
- Think three to five years ahead. Short-term fixes won’t cut it. Build strategies that balance global scale with local adaptation. That means committing capital today to infrastructure that can flex tomorrow.
- Build ecosystems of trust. No one can navigate sovereignty alone. Strong partnerships with governments, regional players and even rivals will define the next era of IT power.
The new digital order
The sovereign data center represents more than technical infrastructure. It’s the next frontier of geopolitical and corporate power. Those who control the infrastructure of data will control the next economy. Those who fail will fall behind, not just in innovation, but in prosperity.
The United States and Europe are charting divergent paths. The critical question for business and policymakers everywhere is not whether to participate, but how to lead. The era of sovereign IT is arriving fast. The only real choice left is simple: shape it, or be shaped by it.
