Blackjack 3D
Michael McCarthy, CFA
As the AI revolution gathers momentum, data centers have become a vital pillar of the global economy and a potential prime target for private investors.
Think about it: in the next five years, consumers and businesses will Expected to generate twice as much data All Data Last created TenAt this rate, there will be 21 billion people in data centers and endpoint devices (such as laptops and mobile phones) Trillion Gigabytes of data by 2027.1
It’s no wonder private equity investors are turning to data centers to meet the exploding demand for storing, processing and transmitting information.
Currently, there are over 1,000 large data centers operated by hyperscale providers around the world.Amazon) and Google (Google), as well as lesser known but increasingly large rental centres. AI infrastructure, including data centers, networks, and other AI-related hardware, is expected to grow 44% annually to reach $423 billion by 2029.2
All this computing consumes electricity, which creates potential opportunities for data center developers who can keep up with the power demands. Over the past decade, most new centers didn’t require even 10 MW of energy to handle peak power loads, but now many developers are announcing new projects that can handle 100 MW or more.3 Currently, AI-related applications consume roughly 20% of these electrons.Four
ChapGPT is a popular chatbot from OpenAI that currently boasts 100 million weekly active users.Five— is literally a power hog. According to the International Energy Agency, each ChatGPT query requires 2.9 watt-hours of power, while the average iPhone battery holds about 5.45 watt-hours of power.6 Watt-hours. At the current usage rate, ChatGPT uses 33,000 units(Detail is “AI in your pocket”)
Naturally, electricity also generates heat, so we believe that adequately cooling existing data centers will require additional infrastructure investment to ensure electrical performance. “The reality of AI in watts and liters”Additionally, we believe increasing customer demand for sustainable energy solutions will see renewable energy play a larger role as operators reduce their environmental impact.
We believe all of these trends favor private infrastructure investors: from 2019 to 2021, private managers accounted for 65% of deal center activity, and in 2022, a record 90%.7 While deal flow in 2023 was relatively slow due to macroeconomic factors, the AI revolution is expected to continue to drive private investment in the digital infrastructure sector.
Sources: (1) Revelations in the Global StorageSphere 2023, IDC, August 2023. (2) Global Artificial Intelligence (AI) Infrastructure Market – Industry Trends and Forecast to 2029, Data Bridge Market Research. (3) Cloud to Edge Datacenter Trends, International Data Corp. (4) JLL Research, Data Centers 2024 Global Outlook, January 2024. (5) OpenAI’s ChatGPT Hits 100 Million Weekly Active Users, TechCrunch, November 2023. (6) Forbes, How Much Power Do Your Gadgets Really Use? Christopher Helman, April 2022. (7) Private Equity to Completely Dominate Data Center M&A Deals in 2022, Breaking All Previous Records, Synergy Research Group, January 2023.
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