Hi all - Happy Halloween! We have been busy at Road To Carry with hands-on AI for PE workshops, so I thought it’d be a good time to bring back the previous write up on the history of PE’s investments in data centers (and adjacencies being invested by PE to ride the AI wave).
Speaking of which, we have the last AI for PE breakfast & learn in this pilot series (AI at Portfolio Companies).
Ramp, WithCoverage, and Chariot Labs will screenshare what they’ve actually built with AI, including an AI bidding platform actively being deployed at a PE-backed roofing business.
VPs who attended the first two sessions are bringing their partners to this one. No BS, and exclusive to PE professionals. Come get free training on AI for PE!
Before we dive into this week’s topic,Â
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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!
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.Â
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.
