With the rise of AI, both data centers and financial firms are faced with increased demands for everything from capital to capacity. Julie Brewer, Ed Diffendal, and Fentress Boyse explore how new technologies like high-performance computing are influencing the approach data centers are taking to financing—and what they need to consider moving forward.
Even in an increasingly constrained market, the data center industry is immersed in a seemingly endless ocean of opportunities to grow. Financial strategy plays a big role in whether data centers will rise to the top, flow with the tide, or get caught in the undertow.
AI’s Impact on Financing
It’s no secret that AI has significantly impacted the data center market. From capacity (which is growing larger and larger to accommodate the continually evolving opportunity that is AI) to leasing (where end users are looking more and more to partners to help them achieve the scale and resource access that are critical to high-performance computing), data centers are facing unprecedented demands.
What may be less obvious is the impact AI is having on the financing market—which is not all that different than what’s happening across the other elements of the data center ecosystem. Increased capacity and capital required to support AI workloads is putting pressure on utility and supply chains. The same is true for the capital markets, where this increase in development is putting pressure on different capital pockets, one of which is the real estate capital market that is navigating weakness in commercial real estate. We’re seeing a high demand for financing to accommodate the continual surge in demand for higher-density, higher-powered data center infrastructure. So, larger and denser deployments mean chunkier demands for the equity and debt financing for which operators like EdgeCore need to compete.
The Importance of Partnerships
As we’ve seen with other sectors—from utility companies and power plants to environmental and community organizations—collaboration between the digital infrastructure industry and other groups is the key to the future success of everyone involved. EdgeCore worked hard to establish a clear vision of target markets and business goals, and Partners Group worked equally hard to establish a thoughtful entrepreneurial governance approach to add resources to the growth plan. By joining forces, EdgeCore has been able to leverage Partners Group’s financial expertise across the spectrum (on subjects like ESG, supply chain, capital markets, debt financing, and performance measurement and management) while Partners Group has been able to leverage EdgeCore’s expertise in and deep understanding of data centers (one of the most attractive and promising capital-intensive assets to investors and lenders).
