The convergence of data centers and power demand is becoming one of the most exciting and critical investment themes of our era. The rise of artificial intelligence (AI) and cloud computing has led to a significant increase in data generation and consumption, necessitating substantial investments in digital infrastructure and power supply to keep pace with this growth. As the world becomes increasingly interconnected, the need for robust data centers and reliable power sources becomes ever more essential.
Data centers have emerged as the backbone of today’s digital revolution, supporting a wide range of applications and services, from cloud computing to AI-driven technologies. The rapid expansion of data centers is driven by the exponential growth in data generation and consumption, which has escalated dramatically over the past few years. Industries and governments alike are investing heavily in digital infrastructure to support this new era of data intensity, recognizing the need for enhanced storage, processing, and delivery capabilities.
Explosion of Data
The significant surge in data can be traced back to the advent of cloud computing in 2006. Key milestones such as Facebook’s achievement of 100 million users in 2008, Instagram in 2013, and Netflix in 2017 highlight this growth. The launch of ChatGPT in 2022, which reached 100 million users within two months, and OpenAI’s SORA, a text-to-video app, underscore the rapid acceleration in data generation and consumption. This explosion has resulted in data usage growing by 100 times over the past 15 years, with more data being created in the last three years than in all of recorded history.
It’s not just the volume of data that matters but also the intensity of its processing. Traditional tools like Google searches are relatively low in power consumption, while AI applications like ChatGPT and DALL-E demand significantly more power. For instance, an AI-generated video using SORA consumes 10,000 times the power of a basic Google search. This surge in data intensity underscores the increasing power demands of advanced AI applications, indicating that we are merely at the beginning of a new wave of data intensity.
As digital transformation continues to permeate all aspects of society, the demand for more sophisticated and power-intensive data processing capabilities will only increase. This trend highlights the critical need for investments in both digital infrastructure and power supply to support the growing data landscape. Businesses across various sectors are recognizing the importance of staying at the forefront of this technological shift, leading to a surge in demand for data centers and the power needed to operate them efficiently.
Data Centers: Backbone of the Digital Revolution
Data centers have emerged as the critical infrastructure supporting this digital revolution. Over the past five years, there has been a 17-fold increase in the number of US-leased data centers, driven primarily by the rise in cloud computing and AI. In 2024 alone, the US will add 5,000 megawatts of data center capacity, equivalent to 1% of the nation’s total power consumption. This surge in demand underscores the critical role of data centers in storing, processing, and delivering data.
The growth of data centers is a global phenomenon, with the US expected to see over $1 trillion invested in data centers in the next five years, matched by an additional $1 trillion internationally. This global investment underscores the scale of data center construction, exemplified by the largest data center under construction, which will demand 500 megawatts of power—the equivalent of the power consumption of 375,000 homes. OpenAI’s proposal to build 5,000-megawatt data centers further highlights the staggering scale of future developments.
As data centers become more integral to the digital ecosystem, their importance in supporting various technological advancements cannot be overstated. They provide the necessary infrastructure for cloud services, AI applications, and other data-intensive processes that power modern society. As such, the investment landscape surrounding data centers is experiencing unprecedented growth, attracting significant attention from investors looking to capitalize on this essential aspect of digital transformation.
Regional and Global Trends
While the US leads in data center capacity, regions like Europe and Asia are also experiencing significant growth. Asia, representing two-thirds of the world’s population but accounting for just 15% of global data center leasing, poses immense growth potential. This regional growth is expected to continue as global cloud migration advances, with emerging markets particularly poised to benefit from increased digital infrastructure investments.
The rapid expansion of digital infrastructure comes with its challenges, particularly the power required to support this growth. For instance, Atlanta has become the second-largest global data center market, with data center demand increasing 46 times since 2019. Consequently, Georgia’s power demand is projected to grow by 39% by 2030. Other states such as Arizona, Indiana, Virginia, and Texas are also facing similar challenges with projected annual power demand growth rates exceeding 5%.
In parallel with the regional trends in the US, European and Asian markets are also experiencing rapid growth in data center capacity. The European market benefits from supportive regulatory frameworks and increasing digital adoption across various sectors, while Asia’s growing digital economy drives substantial investments in data centers. These trends highlight the global nature of this investment opportunity, with significant growth unfolding across different regions, shaping the future of the digital landscape.
Power Demand: A Looming Bottleneck
The sudden spike in power demand represents a significant shift for a US market that has experienced relatively flat power demand for two decades. Compounding this issue is the rise of electric vehicles (EVs), which increase a home’s power consumption by 40%, and a $500 billion reindustrialization effort in the US that demands power-intensive factories. The convergence of these factors underscores the pressing need to develop robust power supply solutions to meet the burgeoning demand.
The rapid rise in power demand also presents significant challenges, particularly in regions experiencing the highest growth rates in data center capacity. For instance, Atlanta has become the second-largest global data center market, with demand increasing 46 times since 2019. Consequently, Georgia’s power demand is projected to grow by 39% by 2030. Other states such as Arizona, Indiana, Virginia, and Texas are also facing similar challenges, with projected annual power demand growth rates exceeding 5%. This uptick in demand necessitates substantial investments in power generation and distribution infrastructure.
The emergence of a power bottleneck highlights the critical need for innovative solutions and investments in renewable energy sources to meet the rising demand. Despite the growing dependence on digital infrastructure, approximately 15% of the US’s power supply still comes from coal plants that are being retired. Additionally, the aging power grid, averaging over 40 years old, further complicates the situation, as it may struggle to handle the increased loads. The intermittency of renewable energy sources, such as wind and solar, which have a capacity factor of only 30%, necessitates backup power from natural gas and innovations in battery storage to ensure grid stability.
Investment Opportunities
The convergence of surging data center capacity and rising power demand presents a substantial investment opportunity. Blackstone, being the largest global investor in data centers and AI-driven infrastructure, identifies significant potential in several areas. With a strategic approach, it aims to capitalize on this megatrend by investing in key components of the digital and power infrastructure required to support the ongoing transformation.
Data Center Leasing
Blackstone’s extensive portfolio in data centers, holding over $70 billion in assets with an additional $100 billion in the pipeline, underscores its commitment to this burgeoning sector. These assets include under-construction facilities and acquisitions like Airtrunk, positioning Blackstone at the forefront of data center leasing and development. Moreover, many of these assets are backed by long-term contracts with AA-rated counterparties, offering stable, attractive returns and enhancing investor confidence in the potential for consistent and lucrative gains.
By strategically investing in data center assets, Blackstone not only supports the growing demand for digital infrastructure but also ensures that it remains a key player in this essential sector. Its forward-thinking approach allows it to address the needs of various industries and regions, supporting the global expansion of digital services and technologies. As data centers continue to evolve and expand, Blackstone’s investments will enable it to maintain its leadership position and capitalize on the ongoing digital revolution.
Power Generation and Utilities
Data centers have become essential infrastructure for the digital revolution. In the past five years, the number of US-leased data centers has grown 17-fold due to the boom in cloud computing and artificial intelligence. By 2024, the US is set to add 5,000 megawatts of data center capacity, which is about 1% of the nation’s total power usage. This demand highlights the crucial role of data centers in storing, processing, and delivering data.
Globally, data center growth mirrors this trend, with the US projected to see over $1 trillion invested in data centers over the next five years, matched by another $1 trillion internationally. This investment reflects the massive scale of data center construction, such as the largest data center currently being built, which will require 500 megawatts of power, enough to supply 375,000 homes. OpenAI’s plan to construct 5,000-megawatt data centers exemplifies the future growth on the horizon.
As data centers become more integral to our digital infrastructure, their significance in enabling various technological advancements like cloud services and AI cannot be overstated. They provide the necessary backbone for data-intensive processes that drive our modern society. Consequently, the investment landscape for data centers is experiencing substantial growth, drawing considerable interest from investors eager to capitalize on this crucial aspect of digital transformation.