The Infrastructure of AI: Data Centers Webcast Replay

This perspective is part of our Anchoring Your Portfolio with Real Assets series.

AI is not possible without the infrastructure behind it. In this discussion, we focus on data centers, provide an in-depth analysis of current market conditions, investment activities and future projections. Presented by prominent industry experts, the discussion highlights the exponential growth in data demand, the competitive advantages of data centers and the increasing role of cloud service providers (CSPs) in AI investments. We also delve into the challenges of energy constraints and the expected rise in data center rents.

Key Highlights

• Exponential Data Growth: There is a significant increase in data creation, surpassing the current supply due to power limitations.
• Sticky Customers: High switching costs result in low client churn rates.
• Attractive Development Returns: Despite rising costs in funding, labor and land, development returns remain enticing.
• Sustainability Scrutiny: Governments, power utilities and communities increasingly focus on sustainability.
• CSP Ownership: Major cloud service providers prefer owning and operating their data centers.
• Technical Expertise: Data center design is growing in size and complexity necessitate advanced technical skills.

Growing Data Center Investments

Data centers have seen a considerable rise in investment activities, driven by the pandemic and advancements in AI. We discuss a notable increase in mergers and acquisitions, public offerings and refinancing deals in the data center sector.

AI and Cloud Service Providers

Cloud service providers are at the forefront of AI investment, with significant capital expenditures projected in the coming years. We outline the expected increase in AI-related spending and its proportion of total IT expenditures.

Energy Constraints and Data Centers

One of the critical challenges faced by data centers is the limitation posed by the existing power grid. The report discusses the bottlenecks in energy supply and the need for significant enhancements in the power grid to support future data center expansions.

Rising Data Center Rents

We discuss predictions for strong growth in data center rents in the U.S., driven by increasing demand and limited supply.