"This year, we are going to put $300 billion into building data centers in this country. Is all of that needed?" said Himanshu Saxena, chairman and chief executive at private-equity firm Lotus Infrastructure Partners, which invests in power plants. "I have no way of telling."
To protect against risks, Lotus seeks to sign long-term contracts with large users of data centers that have solid balance sheets, so-called hyperscalers such as Google, Amazon and Microsoft, instead of the operators of the facilities serving them or other intermediaries, Saxena said.
"If I'm selling power to somebody, I want it to be a Google on the other side. I do not want it to be a middleman or a [data center operator], because I can't see what they would be doing in 15 years," he said. "If you are doing a deal with a heavily levered data center company and 10 years from now they go under, our contract is worthless."
The sheer volume of capital required to build generating plants and data centers with tens of thousands of power-hungry digital processors makes speculation more difficult than in previous infrastructure booms, said Todd Bright, co-head of private infrastructure for the Americas at Partners Group. He is also a partner at the Swiss private-equity firm.
"[There were] very low barriers to entry compared with building data centers," Bright said of past infrastructure booms turned into busts. As an example, he cited the "build it, they will come mentality" that predominated in the rollout of fiber-optic systems for broadband services during the late 1990s, which hurt telecommunications companies when the dot-com bubble burst.
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