Embracing Circular IT for Sustainable Growth
By Samuel Pollard
Artificial intelligence and cloud adoption are creating unprecedented demand for compute and storage infrastructure. Global data center capacity demand is forecast to grow at over 20% annually through 2030, rising from roughly 60 gigawatts (GW) today to as much as 298 GW by the end of the decade, with AI workloads accounting for the majority of this growth.1
Hardware demand is escalating at a similarly frenetic pace. Industry analysis shows that AI-ready data center capacity is growing at 33% annually, with such workloads expected to make up nearly 70% of total capacity by 2030.1 Enterprise demand for high-performance solid-state drives (SSDs) has surged as generative AI requires faster, denser storage systems within servers and clusters.2 Together, these trends present a significant opportunity for investment and growth for circular IT business models.
Circular IT: Overview & Key Sub-Sectors
Circular IT refers to the set of practices and services that extend the useful life of technology assets, recover residual value and minimize waste. It can be broken down into three broad categories.
ITAM tracks cost, risk and lifecycle performance across assets, while DaaS packages hardware provision, asset refresh and return into a subscription model. This approach shifts enterprises from capital expenditures to predictable operating expenses, a trend expected to accelerate over the next decade.
ITAD focuses on the secure decommissioning, sanitation and downstream handling of devices and parts. The highest-value business models prioritize reuse and remarketing before recycling, while delivering auditable certificates of data destruction and compliance reporting.
Recommerce involves refurbishing and reselling used equipment. While more common in consumer devices, it is increasingly relevant for enterprise infrastructure such as servers and storage. This creates secondary markets where high-value, enterprise-grade equipment can find renewed use.
Businesses that focus on high-value components, particularly those with applicability across multiple use cycles and robust aftermarket demand, are strongly positioned to capture value in the circular ecosystem. An illustrative example of this model can be seen in ecube, a former Baird Capital portfolio company that provides end-of-life disassembly and parts reuse services for global aircraft owners and operators. This investment offered insight into how circular models can both contribute to economic returns and support more sustainable outcomes. The same dynamics apply to IT infrastructure, where servers and storage carry residual value that can be unlocked through recommerce and reuse.
IT Circularity Market Drivers
The momentum behind Circular IT is not the product of a single trend, but rather several underlying factors. Sustainability commitments are tightening, supply chains remain fragile, and the economics of AI hardware are squeezing budgets. At the same time, rapid replacement cycles are generating valuable streams of reusable equipment, while regulators are embedding sustainability reporting into law. Together, these factors create a powerful pull toward circular practices, making them both a necessity and an opportunity for operators and investors.
a) Sustainability and Net Zero Goals
Electronic waste is the fastest-growing waste stream globally. In 2022, 62 million metric tons of e-waste were generated, but only 22% was formally collected and recycled3 Circular IT helps organizations reduce waste by extending asset lifespans and reducing the need for new equipment.
b) Supply Chain Resilience
Global supply chains for semiconductors, servers, and networking equipment have been disrupted by tariffs, export controls and logistics delays. Organizations are increasingly wary of relying solely on new production. Circular IT boosts supply chain resilience by redeploying assets already within circulation, insulating operators from unpredictable bottlenecks.
c) Cost Savings and Pricing Pressures
Costs for the latest hardware driving AI innovation are rising. Server spending grew more than 70% year over year in 2024, driven largely by GPU-rich systems, while unit sales rose 17%.4 Against this backdrop, enterprises are under growing pressure to extract more value from existing hardware.
Circular IT addresses these cost concerns directly. Disposed assets with remaining utility can be resold, offsetting capital expenditures and freeing up budgets for alternative uses. For large organizations, this can drive significant annual savings.
d) Rapid Replacement Cycles and Residual Value
AI adoption is accelerating 'rip and replace' upgrades where multiple older servers are swapped for high-density GPU systems. Although unsuitable for AI workloads, these displaced machines remain valuable for less intensive applications. Secondary markets absorb such equipment, converting what would have been sunk costs into monetizable assets.
e) Regulatory and Compliance Tailwinds
Policy momentum increasingly supports repairability and reuse. The European Union has adopted a Right to Repair Directive,5 alongside the Ecodesign for Sustainable Products Regulation,6 both of which require durability, traceability and lifecycle transparency. In the United States, California enacted a Right to Repair law covering many categories of electronics.7 At the corporate reporting level, the EU’s Corporate Sustainability Reporting Directive obliges companies to disclose lifecycle impacts, reinforcing the value of auditable IT asset programs.8
Circular IT is evolving from a peripheral sustainability initiative into a core strategic lever for enterprises. The convergence of sustainability goals, supply chain pressures, rising AI hardware costs, rapid replacement cycles and regulatory drivers creates strong momentum for adoption.
Conclusion
The implications are clear. Organizations that implement robust lifecycle management, secure disposition and recommerce programs will not only reduce waste and carbon but also capture financial value and enhance operational resilience. Circular IT platforms, whether focused on ITAM, ITAD or recommerce, are increasingly viewed as critical enablers of the AI era.
The sector is becoming an essential component of data center economics. Those who treat turnover as an opportunity rather than a liability may be better positioned to strengthen their competitiveness, by supporting both sustainability and profitability objectives.
At Baird Capital, we focus on partnering with technology and services businesses that seek to deliver a clear ROI to asset owners and operators. With a 35+ year track record in the broader industrial technology market and a global platform with investors in the US and UK, we are well positioned to support companies that bring technology-driven solutions to manage end-of-life services.
Connect with a member of the team to learn more.
Baird Capital Partners Europe Limited is authorised and regulated by the Financial Conduct Authority.
Related Links
1 Source: McKinsey & Company, “AI power: Expanding data center capacity to meet growing demand”
2 Source: McKinsey & Company, “Generative AI spurs new demand for enterprise SSDs”
3 Source: Equinix, Inc., “Sustainability Report FY2024”
4 Source: IDC, “Artificial Intelligence Infrastructure Spending to Surpass the $200Bn USD Mark in the Next 5 years, According to IDC”
5 European Parliament, “Right to repair: Making repair easier and more appealing to consumers”
6 European Commission, “Ecodesign for Sustainable Products Regulation”
7 Reinhart, “California Passes Right to Repair Law: New Rules for Electronics Repair”
8 European Commission, “Corporate sustainability reporting”