On Thursday, we shared a data center HVAC cooling company for sale, which inspired this piece. Today’s write-up is a slightly different format–aimed to give you a good understanding of the history of PE investing in data centers and less about the investment thesis (which is simple: stability of real estate with long-term contracts + insatiable demand due to exponential data growth).
We will also touch on second-order investment themes around data centers (and telecom infra more broadly) and do a deep dive on it next week!
RTC Interviews: CEO of Tinuiti (New Mountain Backed)
Before we dive in, excited to kick off another event! This time we’re interviewing Zach Morrison, CEO of Tinuiti. I encourage everyone to RSVP here and reserve your seat!
PE Playbook: Data Centers
State of Play
AI is the hot thing today, and relatedly, data centers that power AI have been a big focus area among the investing community.
Case in point: in October, Meta partnered up with Blue Owl to raise $30 billion in a data center joint-venture. The news made waves as $27 of the $30 billion was private debt–making it the largest private credit deal in history.
But rewind back to fifteen years ago when PE started to make data center investments. Back then, it was a niche business model of renting out server spaces to companies (called “colocation”) and only a handful of PE firms invested in the space. Over time, we’d go on to see the birth of digital infrastructure firms such as Stonepeak and EQT Infra as data center investing evolved.
Let’s delve into the history of the asset class through 3 key mega trends: (1) transition from on-prem to the cloud & colocation; (2) digital content boom & edge computing; and (3) AI compute.
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