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Wall Street banks are getting ready to raise billions of dollars taking data centre companies public, even after IPO investors have already piled into anything that looks like a bet on artificial intelligence spending.
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The initial public offering for a Blackstone Inc. data-centre acquisition vehicle next week is set to fire the starting gun on a host of activity over the coming 18 months, and together with Singapore-based DayOne Data Centers Ltd. may raise close to US$7 billion in aggregate, Bloomberg News has reported. Brookfield Infrastructure Partners-backed CSquare has filed confidentially, and a half dozen others are also circling United States IPOs, according to people familiar with the matter.
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Money managers have been clamouring for more ways to play the industry that is expected to spend hundreds of billions of dollars on AI infrastructure, and companies in everything from ventilation to nuclear power are touting their proximity to the sector as they go public. Data centre companies are set to find out just how much exposure the market needs.
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“We haven’t seen data centre IPOs come en masse yet, but that will certainly be a theme this year, next year and into 2028. It’s coming,” said Eddie Molloy, co-head of global equity capital markets at Morgan Stanley.
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Soaring share prices for Equinix Inc. and Digital Realty Trust Inc., two data centre REITs that are already publicly-listed, have sopped up plenty of demand. Shares of each are near record highs, with returns outpacing the benchmark S&P 500 Index by more than 20 per cent this year.
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Three of this year’s five biggest U.S. listings are AI-adjacent companies. Ventilation firm Madison Air Solutions Corp. and electrical equipment maker Forgent Power Solutions Inc. both touted their revenue from data centre customers in their filings. Their stocks have soared 46 per cent and 55 per cent respectively since their debuts.
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“Stepping back, data centres are way underrepresented in the public markets and that will change,” said Molloy. He expects others to optimize their portfolios of offerings as well as think through leverage or tenant concentration before tapping public investors.
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The debt attached to data centre firms could cause some indigestion for investors when the companies finally go public.
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“The market is still working out the right leverage for some businesses,” said Edward Byun, global head of technology ECM at JPMorgan Chase & Co. “Given how quickly many of these companies are growing and how differently their debt is structured, leverage will be a point of investor diligence and views will continue to evolve.”
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Given the sector’s large capital needs, tapping investors who mostly don’t have access to private-market investments — where much of the data centre financing has recently been raised — may have been inevitable.
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“They need the capital, there’s not enough capital out there to fund all of this without going to the public markets,” said Greg Kuhl, global property equity portfolio manager at Janus Henderson.
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