The AI Facility Frenzy | Global Finance Magazine

The enormous appetite of the AI ​​for the computation power feeds a global power of data center. Investors and manufacturers count on the boom to continue.

During the height of the industrial revolution, we saw the level of demand for infrastructure capacity that the boom of artificial intelligence created. It is estimated that around 10 times the computing power is necessary to carry out a chatgp search in relation to an ordinary Google search. According to Goldman Sachs, we can expect the demand for energy from AI to increase by 165% by 2030; MCKINSEY provides that in Europe only, satisfaction of the new computer charge request will require between $ 250 and $ 300 billion in investment, excluding electricity production capacity.

The insatiable appetite of the AI ​​for the computing power, coupled with the current conditions of the request / offer for the workflows / use case based on the cloud, has the pace of the investment and the development of the data centers. A data center is an installation of cloud computing and storage resources that allow the delivery of software applications, AI training and any number of additional processing and production applications.

Currently, the United States runs the AI ​​electricity race, which has built the largest number of data centers in the world. Statista reports that in March, the United States houses 5,426 facilities, followed by Germany with 529, the United Kingdom with 523 and China with 449. By 2030, these figures should increase by around 30 to 40%. Globally, investing in data centers is expected to reach 7 dollars.

Land and power

How does the investment need to build a broken down data center?

“If someone has a terrestrial plot where the development of the data center is achievable, the value of these lands is much higher than it would be the absence of this request,” explains Tim McGuire, Main Director of Project Finance at Rowan Digital Infrastructure, Developer and Manufacturer of Data Centers in the United States. “For example, we see land on the basic markets like the north of Virginia exceeds $ 2.5 million acre and to adapt to the development of hyperscallers – Amazon Web Services, Google, Microsoft – We generally buy a hundred acres more.”

Energy and water are both components of the crucial costs, and energy was the problem of trigger in most geographies, adds McGuire.

“The data centers are very important in energy,” he notes, “and even if the energy infrastructure is there to feed them, the creation of an interconnection can take months, even years. The cost of creating these interconnections can be high. We therefore see more and more public services – in particular public services to undertake interconnection work. ”.

Well -capitalized developers who can afford to meet these requirements have the advantage it says.

The dynamics linked to the availability of energy is different for data centers, observes Gordon Bell, director of the EY-Parthenon digital infrastructure. “Europe is particularly questioned with regard to the availability of energy, taking into account some of the local regulatory obstacles around the widening of power infrastructure,” he said. “The same is also true in North America, when in Asia, it is relatively quick to build this infrastructure.”

Graphic processing units (GPU) are essential for all that concerns AI, and some countries face additional restrictions on the development of the data center according to the number of IPCs that they can import at any time, adds Bell.

“Countries like Canada, Japan, Australia and many in Europe have no restrictions on GPU imports,” he says, “who has created another growth catalyst on the market in these regions.”

In addition, different countries will offer specific incentives on the development of data centers. Certain countries of the Middle East, including the United Arab Emirates, aggressively encourage the development of the data center within their borders, he adds.

Data centers financing

Since the construction of a data center is extremely in capital, donors are generally global companies like Blackstone, notes Claus Hertel, director general of Rabobank, an active lender in the space and developer of his own green data center in the Netherlands. Many investors and lenders have relations with these large companies and have brought together major project financing teams that are active in renewable energies, clean technology and digital infrastructure.

“At the basic level, you have project financing, which incorporates construction, financing and term financing,” explains Hertel. “Once the data center is completed, you have some time – generally a period of three to four years – where the sponsor can decide how to access permanent funding or permanent funding.

Like many of his peers, Rowan Digital Infrastructure is sponsored by a investment capital company, Tim McGuire.

“As a general rule, a investor in investment is faced with some of the pre-development costs, which could include the acquisition of the plot of land and do part of the horizontal development,” he notes. “Rowan does not set up debt funding for projects until we have a signed lease, because at this stage, we are able to obtain very attractive terms. Hyperscalers are very capitalized and profitable public companies with higher level credit ratings.

The future of data center investment

“The context of all this is that the industry has developed considerably in the past two years, and that it should accelerate in the future,” said Gordon Bell. “This requires more and more capital – more capital than many existing owners of these originally subscribed assets. They are looking for ways to raise new capital as well as recycle capital. ”

One of the possible solutions that begins to percolate on the market, he says, is the introduction of dedicated funds that hold a portfolio of stabilized assets.

“This would then provide a certain diversification of risks and allow various investors who seek to make an exhibition in space to invest in a fund which contains a portfolio of assets in different markets and different customers,” he said.

“As a rule, stabilized asset transactions that we have seen concern individual installations or a handful of individual installations,” he adds. “These facilities offer exposure to very specific markets and within each of these facilities, there is often only one customer. Thus, you place a bet concentrated on a single customer and a single market. The investment capital offers that have been made so far have been more nature, a handful of assets or industry. Investors who seek to expose themselves to stabilized assets could simply invest in this fund. »»

Whatever the mechanism that does it, McGuire sees a strong continuous demand for the development of data centers in the future, motivated by the continuous investment of hyperscalers. AI will be a catalyst, but the same goes for cloud services.

“There is a lot of support for the activity of the data center in the foreseeable future,” he predicts.