From discount retailer to STACKIT Cloud AI hyperscaler: How the Schwarz Group plans to attack Amazon & Co. with a billion-dollar bet.

Europe's answer to US clouds? This AI center aims to ensure digital independence – more than just for Lidl & Kaufland: The Schwarz Group is becoming a cloud provider for everyone with STACKIT.

With an investment that dwarfs even Tesla's Gigafactory, the Schwarz Group, parent company of Lidl and Kaufland, is taking a monumental step into the digital future. An eleven-billion-euro data center is being built in Lübbenau, Brandenburg, which will be among the largest in Europe. This project is far more than just the expansion of the IT infrastructure of a retail giant; it is a strategic realignment aimed at transforming itself from a retailer into a European hyperscaler and competing with US giants like Amazon Web Services, Microsoft, and Google.

On the site of a former power plant, the Schwarz Group plans to build a facility that will eventually house up to 100,000 state-of-the-art graphics processing units (GPUs) – a capacity designed for the large-scale training and operation of artificial intelligence (AI). While €2.5 billion will be invested in construction, the lion's share of €8.5 billion will go toward the technological infrastructure. With this investment, the Schwarz Group aims not only to manage the vast amounts of data from its own retail empire with sovereignty, but also to offer external customers a secure, European cloud alternative. Under the name STACKIT, the digital division Schwarz Digits is positioning itself as a guarantor of digital sovereignty, data security in accordance with GDPR standards, and independence from non-European laws such as the US Cloud Act. However, this ambitious transformation carries enormous risks: Can a European provider prevail against the overwhelming competition, and is the massive investment, which exceeds the annual revenue of its own digital division by more than five times, economically justifiable? The eleven billion bet in the Spreewald thus becomes a litmus test for Europe's digital ambitions.

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The Schwarz Group is investing eleven billion euros in a data center in Lübbenau, Brandenburg. This sum significantly exceeds even the six billion euros earmarked for Tesla's Gigafactory in Grünheide and marks the largest single investment in the retail group's history. What at first glance appears to be a massive IT infrastructure project reveals itself upon closer inspection as a strategic realignment of far-reaching importance. The parent company of Lidl and Kaufland is attempting nothing less than to transform itself from a pure food retailer into a European cloud provider, thereby taking a position that has so far been dominated by American technology giants.

The scale of the project is impressive. A data center with an initial connected load of 200 megawatts will be built on an area of ​​13 hectares by the end of 2027. The six independent modules will eventually be able to accommodate up to 100,000 state-of-the-art graphics processing units (GPUs). For comparison, the data center that Deutsche Telekom is currently building in Munich in partnership with Nvidia is equipped with 10,000 GPUs. The Schwarz Group is thus planning a data center that is ten times larger than comparable current projects in Germany.

The investment is divided between two main areas. Two and a half billion euros are being invested in the physical construction of the facility, while the majority of the eight and a half billion euros is being invested in the IT infrastructure. This division illustrates the true core of the project: it's less about concrete and steel and more about highly specialized computing technology required for training and operating artificial intelligence. The Schwarz Group is thus positioning itself not as an operator of an ordinary data center, but as a provider of hyperscale AI training capabilities.

Strategic realignment beyond the core business

The strategic motivation behind this investment only becomes clear when viewed against the backdrop of the Schwarz Group's overall performance. In fiscal year 2024, the Group generated total revenue of €175.4 billion with 595,000 employees worldwide. Its two retail subsidiaries, Lidl and Kaufland, operate a combined total of approximately 14,200 stores in 32 countries. The digital division, Schwarz Digits, which includes the cloud platform STACKIT, maintained stable revenue at €1.9 billion. This figure highlights a significant discrepancy: while the retail business generates nearly €170 billion in revenue, the digital division contributes only a fraction.

The €11 billion investment thus corresponds to more than five times the annual revenue of the entire digital division. Such a ratio is exceptional even in the capital-intensive technology sector and cannot be justified by short-term return expectations. The Schwarz Group is clearly pursuing a long-term strategy of vertical integration that extends far beyond traditional retail. This strategy is modeled on Amazon, which began offering its own IT infrastructure externally as a service in the mid-2000s. Today, Amazon Web Services is the world leader in cloud infrastructure with a global market share of 30 percent, ahead of Microsoft Azure with 20 percent and Google Cloud with 13 percent.

Vertical integration offers the retail group several strategic advantages. First, it enables complete control over its own data and systems. In a business sector where millions of transactions are processed daily at checkouts and vast amounts of data are generated from supply chains, order processes, and customer loyalty programs, this data sovereignty is of considerable strategic value. The Schwarz Group not only processes the movement of goods and payment flows but also possesses detailed information on customer behavior, preferences, and purchasing patterns. This data forms a valuable raw material for the development of proprietary AI applications and data-driven business models.

Furthermore, in-house cloud infrastructure significantly reduces dependence on external providers. The three major US hyperscalers control approximately 72 percent of the cloud market in Europe. European companies that build their digital infrastructure on these providers inevitably become technologically and economically dependent. Pricing is dictated by the hyperscalers, and migrating to alternative providers is complex and costly. The Schwarz Group avoids this dependence by building its own capacity, thereby securing long-term strategic flexibility.

Digital sovereignty as a business model

The Schwarz Group is not positioning its data center solely for its own use. Christian Müller and Rolf Schumann, the two board members of the digital division Schwarz Digits, emphasized at the groundbreaking ceremony that the data center primarily serves the company's own needs, but that capacity will also be made available to external customers. This wording suggests a hybrid business model in which internal use takes priority, but the marketing of external cloud services is intended to be developed as an additional source of revenue.

For this external business, Schwarz Digits is positioning itself as a provider of digital sovereignty with its STACKIT cloud platform. The concept targets companies and public institutions that want their data processed exclusively in Europe and place the highest demands on data protection and legal control. STACKIT currently operates four data centers in Germany and Austria; a fifth in Lübbenau would significantly expand capacity. The Schwarz Group emphasizes that data is stored exclusively in Germany and Austria, that the infrastructure is fully GDPR-compliant, and that no extraterritorial laws such as the US Cloud Act apply.

This positioning meets with growing demand. Highly regulated sectors, in particular, such as financial services, healthcare, public administration, and critical infrastructure, are seeking cloud solutions that guarantee complete data sovereignty. The market share of sovereign cloud solutions in the overall public cloud infrastructure market in Germany is estimated to reach approximately ten percent by 2030. With an expected market volume of over twenty billion euros, this corresponds to a segment of around two billion euros that appears attainable for European providers.

The Schwarz Group is not the only player focusing on digital sovereignty. SAP, Deutsche Telekom, Ionos, and Siemens are negotiating joint bids for EU-funded AI data centers. The German government has declared digital sovereignty a political priority, and the Federal Office for Information Security (BSI) announced a cooperation with Schwarz Digits in March 2025 to develop sovereign cloud solutions for public administration. Federal Digital Minister Karsten Wildberger praised the project in Lübbenau, stating that Germany needs computing power to compete at the forefront of artificial intelligence, and that only with high-performance data centers can its competitiveness be strengthened.

This political support is of considerable importance to the project. Unlike failed major projects such as the Intel factory in Magdeburg, which was finally canceled in July 2025 after lengthy negotiations over subsidies totaling €9.9 billion, the data center in Lübbenau will not receive any government funding. The Schwarz Group is financing the project entirely from its own resources. Nevertheless, the favorable support from politicians is advantageous, particularly regarding permitting processes and regulatory issues. The fact that the Minister for Digital Affairs was personally present at the groundbreaking ceremony underscores the strategic importance of the project for Germany's digital infrastructure.

Location choice: between pragmatism and symbolism

The choice of Lübbenau in the Spreewald region as the location was based on pragmatic considerations. The property is situated on the site of the former Lübbenau lignite-fired power plant, which was decommissioned in the summer of 1996. However, the power supply infrastructure built for the plant remains in place and fully functional. High-voltage lines and substations, originally designed for a power plant output of several hundred megawatts, make it possible to provide the required 200-megawatt connection capacity for the data center without the need for costly new infrastructure development. At many other potential locations, expanding such grid capacity would involve considerable time and financial investment.

Furthermore, the location offers excellent conditions for integration into local energy cycles. The waste heat generated during data center operation can be fed into the district heating network of the regional energy supplier, thus providing heat to up to 75,000 households, according to the Schwarz Group. This waste heat utilization significantly improves the overall energy efficiency of the project and contributes to its environmental legitimacy. The company emphasizes that the data center is intended to operate entirely on electricity from renewable energy sources during normal operation. However, it remains unclear whether this supply will actually be provided entirely by dedicated new installations or whether it will draw on the general electricity mix with corresponding certificates.

The geographical location offers further advantages. Lübbenau lies in the Lusatia region, a region undergoing structural change and experiencing significant economic upheaval due to the phase-out of lignite-fired power generation. The establishment of a large-scale project of this magnitude is welcomed regionally, even though direct employment will remain limited. Rolf Schumann explained to the press that the primary on-site staff required would be security personnel and gardeners. The actual operational processes of a modern data center are highly automated and require only a limited number of highly qualified specialists. The regional economic effects will stem less from direct employment than from construction investments, business taxes, and potential positive impacts on the surrounding area.

At the same time, Germany's central location offers advantages in terms of latency. Proximity to the Frankfurt Internet Exchange, one of the world's largest data traffic hubs, enables fast data transfers. For cloud services and especially for AI applications that require the transfer of large amounts of data, network connectivity is critical. Furthermore, the distance of over 400 kilometers to the Schwarz Group's headquarters in Neckarsulm ensures geographical redundancy. In the event of regional outages or disasters, the availability of critical IT systems remains guaranteed thanks to the geographical separation of the data centers.

Energy economic challenges of the AI ​​age

The project's energy footprint deserves special attention. A data center with a connected load of 200 megawatts consumes as much electricity at full capacity as a medium-sized city. With an average household electricity consumption of approximately 3,500 kilowatt-hours per year, a continuous full load of 200 megawatts equates to an annual consumption of around 1.75 terawatt-hours, which is equivalent to the electricity needs of about half a million households. This scale is remarkable, especially since the data center is designed to be modularly expandable in two construction phases, and the connected load could potentially be increased further in the future.

The high energy demand results from its specific use for AI training and inference. Modern high-performance graphics processors like the Nvidia H100 have a thermal design power (TDP) of 700 watts. A data center with one hundred thousand such processors requires seventy megawatts of electrical power for computing operations alone. Added to this is the energy demand for cooling, network infrastructure, and operating systems, which can easily double the total power requirement. The Schwarz Group is planning for a connected load of two hundred megawatts, which seems realistic for the planned capacity.

The cost structure is largely determined by electricity costs. Germany has the highest electricity costs for data centers in Europe. In 2019, ancillary electricity costs for data center operators in Germany amounted to €113.11 per megawatt-hour, while in the Netherlands they were only €17.08 per megawatt-hour. Taxes, levies, and grid fees account for approximately seventy percent of the electricity price in Germany, with the EEG surcharge being the largest price driver. Unlike other energy-intensive industries, data centers are not exempt from the EEG surcharge.

With an annual consumption of 1.75 terawatt-hours and a conservative industrial electricity price of 15 cents per kilowatt-hour, annual electricity costs amount to approximately €262 million. Over an assumed lifespan of ten years, energy costs alone total €2.6 billion. This figure illustrates that operating costs over the lifetime of a data center can significantly exceed investment costs. The Schwarz Group must therefore ensure competitive electricity prices in the long term to operate profitably. Supplying green electricity from renewable sources could offer cost advantages if corresponding long-term supply contracts are concluded with producers.

The global trend toward increased use of artificial intelligence is driving up the energy demand of data centers worldwide. In the US, data center electricity consumption rose from 176 terawatt-hours in 2023 to a projected 325 to 580 terawatt-hours by 2028, which would represent seven to twelve percent of total US electricity consumption. AI applications account for about twenty percent of data center power consumption, and this figure is rising. A single query to an AI model like ChatGPT consumes about ten times more energy than a conventional Google search. Training large language models requires tens of thousands of graphics processing units (GPUs) to run continuously for weeks, resulting in extreme energy spikes.

This development not only poses challenges to energy supply but also raises questions about its carbon footprint. While the Schwarz Group emphasizes its use of renewable energies, the sheer scale of its energy demand is at odds with the company's climate targets. As part of the Science Based Targets initiative, the Schwarz Group has committed to reducing all emissions to net zero by 2050 at the latest. To achieve this, operational emissions in Scope 1 and 2 are to be reduced by 48 percent by 2030. A data center with the energy consumption of half a million households significantly hinders the achievement of these goals, even if the electricity supply is formally sourced from renewable sources.

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Market dynamics between hyperscaler dominance and European alternatives

The strategic challenge for the Schwarz Group is to hold its own against the established hyperscalers. Amazon Web Services, Microsoft Azure, and Google Cloud control 63 percent of the global cloud infrastructure market, and in Europe, their market share is even higher at 72 percent. This dominance is based on decades of leading positions in technological development, global infrastructure, and market penetration. The three companies invest tens of billions of euros annually in expanding their data centers and developing new services. They possess vast developer ecosystems, extensive service portfolios, and a global presence that European providers cannot replicate in the short term.

The Schwarz Group must therefore focus on specific market segments where it has a competitive advantage. The concept of digital sovereignty targets customers who are willing to pay a premium for data protection and legal control. For highly regulated industries, critical infrastructures, and public administrations, the assurance that data is processed exclusively in Europe and subject to European law can be a decisive factor. The Schwarz Group argues that with US hyperscalers, there is a risk that American authorities could gain access to data under the Cloud Act, even if the data is physically stored in Europe.

However, the situation is more complex than the marketing messages suggest. The European initiative Gaia-X, which was intended to build a networked European data infrastructure starting in 2020, has largely failed. Internal disputes, unclear objectives, and the inclusion of US hyperscalers as members meant that Gaia-X failed to bring about any significant market changes. Europe's collective market share in the cloud sector has continued to decline. The political ambition to create European alternatives has so far not been translated into economically viable business models.

The Schwarz Group differs from Gaia-X through its pragmatic approach. Instead of relying on consortia and government funding, the company invests its own resources and leverages the economies of scale of its retail business. The IT infrastructure required by Lidl and Kaufland for their 14,200 stores offers a solid baseline utilization. With 4,000 employees, Schwarz IT manages the digital infrastructure and all software solutions for 595,000 users within the group. This internal expertise and scale provide a foundation upon which external cloud business can be built. The group operates over 23,000 servers, 30 petabytes of data, and one of the world's largest SAP retail systems.

The cooperation with SAP highlights the market potential. In October 2024, Schwarz Digits and SAP announced the launch of RISE with SAP on the STACKIT cloud. This partnership enables SAP customers to migrate their ERP systems to the Schwarz Group's sovereign cloud, instead of relying on US clouds. For SAP users in German-speaking countries who want to maintain data sovereignty, STACKIT thus offers an attractive alternative. The Schwarz Group itself is migrating the SAP systems of Lidl and Kaufland to its own cloud, which underscores the credibility of the offering.

Further partnerships demonstrate the efforts to build an ecosystem. In October 2024, Schwarz Digits and Deutsche Bahn founded the DataHub Europe platform, which aggregates data from industry and media to train AI models in compliance with legal requirements. Aleph Alpha, a German AI company in which the Schwarz Group has invested, provides its AI models as Software-as-a-Service via the STACKIT cloud. The first production system, AuditGPT, an AI solution for automating auditing processes, is already in use at Deutsche Bahn and the Schwarz Group. These collaborations create use cases and demonstrate the practical applicability of sovereign cloud solutions.

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Comparative analysis of international data center investments

The Schwarz Group's €11 billion investment is part of a global boom in data center investments. In November 2025, Google announced plans to invest €5.5 billion in Germany over the next four years, including the construction of a new data center in Dietzenbach and the expansion of its existing data center in Hanau. Deutsche Telekom and Nvidia are jointly investing approximately €1 billion in a data center in Munich. In the US, Facebook's Meta is planning a single data center with a capacity of five gigawatts, while OpenAI, together with various partners, intends to build data centers with a total capacity exceeding twenty gigawatts.

These figures illustrate that while the Schwarz Group's investment is exceptional by European standards, it is by no means excessive on a global scale. The global AI boom is driving a massive expansion of data center capacity. In Germany, investments in data centers are expected to reach twelve billion euros in 2025. Installed capacity is projected to increase from the current 2,980 megawatts to over 5,000 megawatts by 2030. AI data centers, which currently account for fifteen percent of total capacity, are expected to increase their share to forty percent by 2030.

Germany is the leading data center location in Europe, with a total capacity of approximately 2.4 gigawatts. However, in international comparison, Germany lags significantly behind the USA (around 40 gigawatts) and China. Its central location in Europe, proximity to the Frankfurt Internet Exchange, and stable networks with low failure rates make Germany attractive. Disadvantages include high electricity costs, lengthy permitting processes, and regulatory requirements that can negatively impact competitiveness.

The Schwarz Group benefits from the existing infrastructure of the former power plant in Lübbenau, which simplifies permitting processes and grid connection. Nevertheless, high electricity costs remain a structural disadvantage for the location. In European competition, Germany faces competition from countries like the Netherlands, Ireland, and Scandinavian nations, which offer significantly lower energy prices. The fact that the Schwarz Group is still investing in Germany underscores the strategic importance of proximity to its core business and customer base.

Risk assessment between technological vision and economic reality

The €11 billion investment poses significant economic risks for the Schwarz Group. This amount represents more than six percent of the Group's total annual revenue and almost six times the annual revenue of its digital division. Even for a corporation of this size, such an investment places a burden on the balance sheet. The Schwarz Group increased its total investments by 7.5 percent to €8.6 billion in fiscal year 2024. Investments of €9.6 billion are planned for fiscal year 2025. The data center in Lübbenau would significantly increase this investment rate and will require substantial capital resources over several years.

Refinancing this investment depends on the Schwarz Group actually succeeding as a cloud provider in the market. Internal use by Lidl and Kaufland may utilize some of the capacity, but to justify the investment economically, substantial external revenue must be generated. The sovereign cloud market in Germany is estimated to reach approximately two billion euros by 2030. Even if the Schwarz Group achieves a market share of ten percent, this corresponds to annual revenue of two hundred million euros. With a typical gross margin structure in the cloud business of around thirty percent, this would result in an annual gross profit of sixty million euros, which would mean an amortization period of well over one hundred years.

This simplified calculation shows that the investment cannot be justified by cloud revenues alone. The Schwarz Group must therefore focus on additional value creation. This includes cost savings by avoiding external cloud expenses, building strategic positions in future markets, and the ability to develop AI applications that optimize the core business. For example, AI-supported systems can manage supply chains more efficiently, improve inventory management, reduce shrinkage, or enable personalized marketing. If such applications lead to measurable improvements in the retail business, the investment can indirectly pay for itself.

Another risk lies in the rapid pace of technological development. AI is evolving at breakneck speed, and today's cutting-edge technology can become obsolete in just a few years. The Schwarz Group is investing in graphics processors whose lifespan is estimated at around five years before performance improvements from newer generations necessitate an upgrade. The €8.5 billion investment in IT infrastructure must therefore be understood as an ongoing commitment, as regular reinvestments are essential to remain technologically competitive.

Furthermore, there is a risk that sovereign cloud solutions will not gain traction in the market. If European companies continue to favor US hyperscalers despite data privacy concerns because they offer a broader service portfolio, better performance, or lower prices, demand for STACKIT will remain limited. The digital division's current revenues of €1.9 billion demonstrate that external revenues have not yet reached the level required to refinance such investments. The Schwarz Group is in a development phase, the success of which can only be assessed in a few years.

Structural policy classification and macroeconomic perspective

From an economic perspective, the Schwarz Group's investment is a mixed bag. On the one hand, it strengthens Germany's digital infrastructure and contributes to its strategic autonomy. Europe is highly dependent on American technology companies, which poses economic and security risks. Building its own capacities reduces this dependency and enables European companies to maintain data sovereignty. Such investments also support the German government's political priority of making Germany a leading location for data centers.

On the other hand, the failure of projects like Gaia-X shows that political will alone is not enough to establish competitive alternatives. The market power of the hyperscalers is based on decades of investment, technological excellence, and economies of scale that are difficult to replicate. European providers must concentrate on niche markets and cannot compete with the US corporations on a broad scale. The Schwarz Group is pursuing a clever niche strategy with its focus on sovereign solutions, but whether this will be enough to recoup its eleven billion euro investment remains uncertain.

The regional economic effects for Lübbenau and Lusatia are limited. Data centers create hardly any direct jobs, as their operation is highly automated. Value creation is concentrated in the construction phase and in services such as maintenance and security, which, however, do not generate a significant volume of employment. The symbolic importance of establishing a forward-looking project in a region undergoing structural change is politically valuable, but it does not replace the jobs lost due to the phase-out of coal.

The energy dimension deserves special attention. A data center with the electricity consumption of half a million households poses significant challenges to energy supply, especially if the goal is to use 100% green electricity. The expansion of renewable energies must keep pace to ensure a positive climate balance. While using waste heat for district heating is ecologically sound, it cannot compensate for the high absolute energy demand. In the context of climate goals, it must be questioned whether the societal benefits of AI applications justify the enormous resource consumption.

Strategic repositioning as a long-term game

The Schwarz Group's investment in Lübbenau is not an isolated major project, but rather part of a comprehensive strategic realignment. The group is transforming itself from a pure trading company into a diversified technology group with business units in production, recycling, IT, and cloud services. This diversification follows the example of successful corporations like Amazon, which control value chains and develop new business areas through vertical integration. The Schwarz Group is leveraging the economies of scale of its trading business to build up capacities that can subsequently be marketed externally.

The long-term vision is clear: The Schwarz Group aims to establish itself as the first European hyperscaler, thus occupying a position currently held exclusively by American corporations. Whether this goal is realistic remains to be seen. The challenges are immense, the prospects for success uncertain, but the strategic approach is coherent. Instead of relying on government funding or consortia, the group is investing its own resources and creating tangible results.

The eleven billion euros should be understood less as a short-term investment for returns and more as a long-term strategy for strategic positions in the digital economy. For a corporation with 175 billion euros in annual revenue, the amount is substantial, but not life-threatening. The Schwarz Group has solid cash flows from its retail business and can shoulder this investment, even if the amortization period extends over decades. The crucial factor will be whether it succeeds in building a sustainable ecosystem and acquiring enough customers who recognize digital sovereignty as a strategic value and are willing to pay for it.

The coming years will show whether the gamble pays off. The first construction phase is scheduled for completion by the end of 2027. Then it will become clear whether the demand for sovereign cloud services is actually as high as hoped, whether costs remain within budget, and whether technological developments overtake the investment. The Schwarz Group is playing a high-risk game, but it is playing it with determination and financial strength. Whether the eleven billion euros prove to be a far-sighted investment in the future or a costly miscalculation will only be definitively assessed in a decade.

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