Subsea cable investment hits new heights as AI drives demand for ocean bandwidth

There was a time when subsea cables were the quiet plumbing of the internet useful, unglamorous, and largely invisible to anyone not working in network engineering. That era is over. Today, the cables threading the ocean floor have become one of the most strategically contested assets in global technology, and the companies financing them read like a who’s who of Silicon Valley.

The numbers tell their own story. The global subsea systems market is projected to grow by approximately US$4 billion over the next four years, driven by a surge in cloud adoption, hyperscale data centre expansion, and the mounting bandwidth appetite of AI workloads. Route planning has become as much a board-level conversation as a technical one.

From customers to architects

The most significant structural shift in the sector is the transformation of hyperscalers from passive buyers of capacity into active designers of infrastructure. These firms are no longer content to lease bandwidth on cables built by telecoms carriers. They are co-investing in, and in some cases outright owning, new transoceanic routes.

Carl Grivner, CEO at FLAG, has been watching this shift play out in real time. “We have developed what we think is the Vision 2030, which is really about a route strategy,” he says. “Those routes are where the major data centre hubs are going to be for cloud as well as AI capability.” The implication is clear: the geography of subsea cables is now being drawn around the geography of compute, not the other way around.

Ana Nakashidze, CEO at AzerTelecom, puts the competitive tension plainly. With hyperscalers driving investment, she says, they will also drive maintenance and infrastructure agendas — and network operators could see their roles diminish as a result. It is a polite way of saying that the traditional carriers face a structural challenge to their business models that will not resolve itself quietly.

Route diversity as a product

Beyond the investment story, something subtler is changing in how operators think about network design. Redundancy, once an engineering afterthought, is now being packaged and sold as a premium feature. In a world where a single cable cut can affect millions of users and trigger regulatory scrutiny, customers are paying for guarantees, not just gigabits.

The Baltic Sea has become an uncomfortable case study. A series of incidents involving damage to cables in the region has forced operators to confront what analysts are calling persistent grey-zone risk – deliberate or semi-deliberate disruption that falls below the threshold of conventional military action but still knocks critical infrastructure offline. In response, major operators are designing networks with multiple geographically distinct routes and alternative landing points, treating resilience as a core product attribute rather than a backup plan.

For data centre executives, the lesson is direct. The connectivity underpinning cloud services, financial platforms, and AI infrastructure is only as good as the weakest link in its physical path. Understanding where that path runs — and how many alternatives exist – is no longer optional due diligence. It is a competitive strategy.

The power problem nobody is talking about

There is one constraint that sits behind the cables, the landing stations, and the data centres themselves, and it is arguably the most fundamental of all: power. New hyperscale data facilities are being commissioned with energy requirements that rival those of small cities, and Grivner is blunt about the gap between ambition and infrastructure. The power systems required to support the next generation of AI data centres, he says, simply do not exist yet in many target markets.

This interdependency between subsea connectivity and energy infrastructure is emerging as a critical planning consideration. A perfectly designed cable route that terminates at a landing station connected to an unstable grid is not a resilient system. As investment decisions are made across the sector in the coming years, the ability to guarantee power continuity is likely to become as important as geographic diversity in determining where cables land and where data centres are built.

Subsea Sector Report

The findings are drawn from Capacity’s State of the Sector: Subsea report, produced in partnership with senior figures from across the submarine cable ecosystem. Through a series of in-depth conversations with operators, investors, and technology leaders – including Carl Grivner of FLAG, Ana Nakashidze of AzerTelecom, Maxie Reynolds of Subsea Cloud, and Valentino Giuseppe of Sparkle. The full report, which examines capacity demand, hyperscaler influence, technological innovation, and the geopolitical pressures facing the sector, is available to download now.

Navigating seas of change at a crossroads of connectivity