Why Private Equity Is Investing in Data Centers

AI Spending and Infrastructure Demand

At the Steers Center for Global Real Assets, we sit just 45 minutes from Ashburn, Virginia — home to “Data Center Alley,” the largest concentration of data centers in the world. Ashburn has the largest data center concentration due to an abundance of fiber from AOL and Verizon locating there in the 1990s, low-cost electricity, and a county and commonwealth that created incentives for data centers. While still a hub for cloud storage, Ashburn has become ground zero for the artificial intelligence revolution. Every AI model, from generative text to large-scale machine learning, depends on physical infrastructure: racks of servers, industrial cooling systems, and vast energy inputs.

Private equity has taken notice. In 2024 alone, more than $108 billion flowed into data center deals (PitchBook). Blackstone, which already owns QTS Datacenters, Aligned, and CoreWeave, acquired AirTrunk for $16 billion. DigitalBridge and Silver Lake committed $9.2 billion to Vantage Data Centers, while Brookfield expanded its AI-linked infrastructure strategy. Analysts project AI spending will reach $632 billion by 2028 (Schneider Electric), and GreenStreet forecasts 15 gigawatts of new data center capacity over the next five years, enough to power over 12 million homes. 

This wave of investment is exactly why we launched a Digital Infrastructure course in 2024 within our Master’s in Real Assets program. Two-thirds of the class focuses on data centers, including a tour of a hyperscale facility in Ashburn, while the remaining third covers cell towers and fiber. The goal: to prepare students for the front line of an asset class where technology and real assets converge.

Key Takeaways

• Private equity invested more than $108 billion in data centers in 2024, fueled by surging demand from artificial intelligence workloads.
• Exit strategies for private equity investors include Initial Public Offering (IPO) as traditional corporations, IPOs as Real Estate Investment Trusts (REIT), and sales to strategic buyers or infrastructure funds.
• Successful IPO candidates must demonstrate long-term revenue visibility, high margins, and disciplined capital expenditure.
• The AI-driven data center boom is projected to add 15 gigawatts of new supply over the next five years, with spending expected to hit $632 billion by 2028.
• The Steers Center is preparing students for this transformation through its Digital Infrastructure course, which combines classroom learning with tours of hyperscale facilities.

Let’s fast forward five to seven years. After billions are invested in the data center shell, uninterrupted power supply systems, generators, and cooling, how do private equity firms turn today’s frenzy into tomorrow’s realized returns? The answer lies in exit strategies — and which monetization path best suits a maturing digital infrastructure platform.

IPO as a Traditional Corporation

Taking a data center platform public can be highly attractive when markets reward AI-linked infrastructure. Scale matters — platforms typically need a $1 billion+ enterprise value and visible growth. Public peers like Equinix and Digital Realty often trade at premium multiples, creating room for multiple expansion.

The upside: An IPO provides liquidity while allowing private equity to retain exposure. It also creates a currency for acquisitions and strengthens credibility with hyperscale tenants.

The downside: Timing risk. IPO markets can close suddenly. Public firms face tighter ESG disclosure requirements and the constant pressure of quarterly earnings, which may clash with long development cycles.

Takeaway: This path works best when public valuations are ahead of private markets and the platform has a compelling growth story.

IPO as a REIT

Converting to a REIT can unlock a broader investor base. This path suits portfolios that are mature, geographically diverse, and anchored by long-term leases producing steady cash flow.

The advantages: Access to yield-focused investors, tax efficiencies, and valuation uplift if REIT multiples exceed infrastructure multiples.

The drawbacks: REITs must distribute most earnings, leaving less capital for growth. Conversion is complex, requiring IRS compliance, and valuations are highly sensitive to interest rates.

Takeaway: A REIT IPO is best when investors are seeking stability and yield, and when interest rates support the sector.

The Steers Center for Global Real Assets offers a class titled “Real Estate Public Equity” for MBA and Master’s in Global Real Assets students to learn more about REITs and their role in today’s capital and real estate markets.

Preconditions for Going Public

Private equity won’t attempt an IPO without four fundamentals in place:
1. Long-term revenue visibility, backed by multi-year leases with credit tenants such as Amazon Web Services, Microsoft, Google, or major banks.
2. A scalable growth story, with at least one significant expansion pipeline that public investors can model.
3. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins above 40%, achievable as data centers scale efficiencies in power, cooling, and staffing.
4. A disciplined capital expenditure plan, where growth is predictable rather than reactive.

Sale to a Strategic Buyer or Infrastructure Fund

Selling outright is the cleanest path to liquidity. When private market valuations match or exceed public markets, a sale can provide fast cash with minimal execution risk. Strategic buyers may even pay a premium if the acquisition expands their tenant base or geographic reach.

The trade-offs: all future upside transfers to the buyer, and timing depends on well-capitalized acquirers. Large deals may also trigger antitrust review.

Takeaway: This option fits funds that value certainty and speed, and prefer to avoid the volatility of public markets.

The Bottom Line on Data Center Exits

An IPO may be the most glamorous path, but it is far from automatic. It makes the most sense when:
– Public valuations exceed private market alternatives.
– The platform is in a clear growth phase with contracted demand.
– Market appetite for AI-linked infrastructure is strong.

When those conditions align, private equity can ring the bell on Wall Street, realize meaningful liquidity, and still hold a stake for the next stage of growth.

Author: Jeffrey H. Foster is an Adjunct Faculty of the Steers Center for Global Real Assets at Georgetown University’s McDonough School of Business.