DT pumps €250m into AI factory expansion

• Deutsche Telekom has sold out of its initial AI factory capacity
• It is building a new floor at its Munch facility and increasing the number of Nvidia GPUs deployed in the second phase of its Industrial AI Cloud development
• A gigafactory could be the third phase, but it’s uncertain if the numbers will stack up for DT, noted CEO Tim Höttges
• DT’s executives and partners also hammered home a message about the need for less regulation in Europe and highlighted how the region is lagging behind Asia and the US

Deutsche Telekom is moving quickly to capitalise on the high demand from enterprises for AI cloud services by investing €250m into the expansion of its AI factory facilities at Munich’s Tucherpark, where it will significantly increase the number of Nvidia GPUs deployed and boost the capacity of the datacentre to 20 megawatts (MW) from the current 12 MW.

The German telco announced the plan during a press conference held on Monday morning in Munich, where DT’s CEO, Tim Höttges, and Ferri Abolhassan, the CEO of the telco’s B2B division, T-Systems, were joined by politicians and the CEO of German tech and industrial giant Siemens AG, Roland Busch, to discuss the importance of the current AI factory – aka the Industrial AI Cloud – and the importance of AI in general to the future of Germany and Europe. 

Höttges, Abolhassan and Busch had some very clear messages for the European Commission politicians in Brussels during the course of the presentation – which we’ll come to shortly – but first, the Tucherpark expansion. 

Demand-led expansion

DT announced the €1bn AI factory in partnership with Nvidia a year ago, officially opened the facility in early February and, according to the telco, it sold out within months. 

As a result, DT has been planning the expansion for months already and has decided to add a third floor to the Tucherpark building and deploy more new-generation Nvidia GPUs, including Blackwell Ultra Generation (B300) processors. 

Abolhassan noted that DT’s demand pipeline for its AI cloud, driven by demand from major users, such as Agile Robots, Daimler Truck, Siemens and the local-language AI research consortium and model developer Soofi (Sovereign Open Source Foundation Models), is “so full I could add six or seven floors”.  

What comes next

DT is also looking at its next AI factory move as it wants to maintain its pace of expansion and achieve meaningful scale. 

Its third phase could be an AI gigafactory – one of the planned seven European facilities that will receive EU funding and which would be deployed as part of a consortium, so not just by DT: The European Commission plans to invest up to €10bn in order to attract private investments of up to €20bn in the facilities as part of its efforts to encourage sovereign AI infrastructure deployments and services. (Note that the level of EC funding has changed since the initiative was first announced and that there are two types of facilities – medium-sized, for which bids need to be submitted by 5 February 2027, and large-scale, for which bids need to be submitted by early December 2026.)

DT wants to play a significant role and, as has been previously stated, the telco is talking to partners and investors; developing an application; is prepared to invest €1bn into a jointly funded facility that, with a capacity of more than 100 MWs, would be much larger than its current AI factory; and regards Bavaria as the prime location for an AI gigafactory deployment, as the local authorities have been so helpful and supportive with the Tucherpark facility. 

However, in its announcement today, DT was coy about how its tender process to land an AI gigafactory deal is shaping up: It noted that it is “currently exploring with partners how to expand its commitment in Bavaria. Discussions are at an intensive stage. Implementation depends on sustainable financial conditions, reliable financing, and an overall economically viable model. A final investment decision has not yet been made.”

Essentially, the key to any AI factory plan is utilisation: The AI platforms need to be in use, not idle, in order for the economic case to stack up. Utilisation at the Tucherpark has been fantastic, hence the further investment. 

But DT, and its potential investment partners, has concerns about the potential utilisation of an EC-funded gigafactory facility: Höttges noted that the expectation from the EC is that up to 60% of a gigafactory’s capacity would be set aside for use by public administration (government bodies), which would mean that it would be sitting unused for much of the time – that makes it very hard to build an economic utilisation case, noted the CEO.

“Germany needs a gigafactory – Deutsche Telekom does not need one” but would like to lead a gigafactory consortium if the plans make economic sense, noted Höttges, who added that negotiations with potential partners, including investors and those offering land for such a large datacentre deployment, are at a “tricky phase”. He explained: “We want to put the jigsaw together.”

The CEO, then, was essentially pointing out that Brussels politicians aren’t helping Europe’s position with regards to AI by linking potential funding to conditions that don’t make sense in the business world. 

Indeed, Höttges and his fellow speakers had plenty of strong messages for Europe’s lawmakers. 

Europe is “regulated to death”

DT’s CEO takes every opportunity to put pressure on European regulators and share his views on how their actions are putting the brakes on Europe’s growth and potential, and today was no different. 

Höttges noted he has just been on a trip to Japan, South Korea and Singapore to see how the AI and telecom sectors are developing there and he pointed out during the press conference that South Korea, a country with about one eleventh of the population of Europe, “is developing AI at a speed that is almost scary. This year alone, [South Korea] is investing five times as much in AI as Europe overall.” 

He added that the US last year invested $1tn in datacentres and AI. “If we fail to invest in AI, then we will be falling behind big time when it comes to industrial output… we need to urgently catch up using sovereign infrastructure,” stated Höttges. 

But the lawmakers need to take off the shackles, he believes. 

“Europe has regulated itself to a point where it’s become smaller than it ought to be – it’s a major difference between us and China and the US. In Europe today, we don’t even have any battery production, so the Chinese battery manufacturers have a lot of scaling advantages. We cannot build trains that can be likened to the ones that are manufactured in China, and we don’t have any hyperscalers or cloud providers in Europe because we are simply too small… If we don’t work together based on solidarity in this ecosystem, we won’t be able to scale things, and if we can’t scale things, then we won’t be able to have economies of scale. And if there are no economies of scale, then we will never become competitive with the big players,” stated DT’s CEO, before adding that there is no future for Europe without AI infrastructure.  

Roland Busch, the CEO of Siemens, hammered home the message. “Why aren’t we more successful? Why can’t we really be leading? And what are we lacking? Well, we’re regulating things to death in Europe. There’s overregulation, and we’re always thinking too small. We measure our market share in 27 countries here in Europe, and that’s not the way to scale. And the tech we’re talking about needs scaling – scale is decisive in this… and we need to have more confidence… and this starts with us as managers of companies, we have to encourage people to try out these new things, whether it’s startup technologies [or] implementing AI quickly… AI will change the world in the next three or four years. These next few years will be crucial, and speed is of the essence.” 

In telco terms, DT is moving fast. But if it feels it can’t justify applying to lead an AI gigafactory consortium because the conditions mean the economics don’t stack up, then that won’t be a good sign for Europe or for any of the other telcos that plan to head up a similar consortium in other European markets. 

- Ray Le Maistre, Editorial Director, TelecomTV