National CRE News In Your Inbox.
Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.
Data Center and AI Growth Mean Power Source Investment Opportunities
Ongoing digitization trends and AI technologies are increasing the demand for data centers. At the same time, the growth of these data centers is increasing the power demand to keep everything operational. According to a recently released McKinsey article:
- Data center power demand is expected to grow three times the current capacity by 2030.
- Access to power “has become a critical factor in driving new data center builds.”
- Meeting the demand for generative AI and data centers will require “considerably more electricity” than the United States currently produces.
Enter the Investors
Even as states, municipalities, and power companies balance the growing need for power with sustainability goals, that growth can provide interesting opportunities for investors and “incumbents in data center growth,” the article said.
The article noted that “current progress and limitations alike illuminate three clear areas in which investors may be able to make the most impact:
Power access and sources: Investors could benefit from deploying capital into utility companies’ efforts to expand transmission and distribution infrastructure in major markets. The article also suggested that investing in secondary markets, focusing on fiber build-outs, power infrastructure or data center developers, might be a good strategic move.
Power equipment: New power grids require equipment supply, which could open opportunities to invest in new or emerging technologies. The article said that “shortages of critical equipment have allowed for growth among smaller companies focused on creating generators ” and hyperscale-focused providers interested in creating power distribution units (PDUs).
Trades and technicians: There’s a gap between the electrical and mechanical installation labor supply and the need for such experts. As more data centers are coming online, “contractors are moving talent to installation locations,” the article said. Investment opportunities in this space can include consolidating and scaling subscale contractors or “reimagining talent sourcing and training” to address shortages.
The article concluded by noting that data center growth has exposed gaps in power infrastructure. However, the savvy investor has opportunities to “invest in the next generation of power supply and data storage,” the article commented. In addition to generating positive returns, investors considering such a strategy “can fuel the growth of gen AI and position themselves favorably in the new generation of power technology,” the article said.
- ◦Financing
- ◦Economy
- ◦Policy/Gov't
