AI infrastructure is burning money. Data center IPO "peak" is about to flood to Wall Street.

Major investment banks on Wall Street are preparing to push multiple data center companies onto the capital market, with fundraising expected to reach tens of billions of dollars. Currently, any target related to the artificial intelligence (AI) industry has already been eagerly sought after by IPO investors. According to reports, a data center acquisition entity under Blackstone Inc. (BX.US) will launch an IPO next week, officially kicking off a surge in data center listings over the next 18 months. This company, in partnership with Singapore-based DayOne Data Centers Ltd., could raise nearly $7 billion. It has been revealed by sources that CSquare, supported by Brookfield Infrastructure (BIP.US), has secretly submitted an application for listing, and six other companies in the same industry are also planning to go public in the US. It is estimated that the AI infrastructure sector is expected to generate capital expenditures of several hundred billion dollars in the future, and asset management institutions are urgently seeking more investment channels in this field. Now, various companies from ventilation equipment to nuclear power industries are touting their association with the data center sector during the IPO process. This will put data center companies to the test in the market: how much industry exposure is the capital market willing to provide. Eddie Molloy, Co-Head of Global Equity Capital Markets at Morgan Stanley, said, "While the data center sector has not yet seen a concentrated wave of listings, this is set to become a core investment theme for this year, next year, and even until 2028. The wave of listings is poised to be unleashed." The two listed data center real estate investment trusts (REITs) - Equinix, Inc. (EQIX.US) and Digital Realty Trust, Inc. (DLR.US) - have seen their stock prices soar, absorbing the market's allocation demand. Currently, both companies' stock prices are near historic highs, with year-to-date returns outperforming the S&P 500 index by over 20 percentage points. Out of the five largest IPOs in the US this year, three are AI-related companies. Ventilation equipment service provider Madison Air Solutions Corp. (MAIR.US) and power equipment manufacturer Forgent Power Solutions Inc. (FPS.US) both emphasized the revenue contribution from data center customers in their prospectuses. Since going public, the stock prices of both companies have surged by 46% and 55%, respectively. Molloy believes, "Looking at the entire capital market, the number of listed companies in the data center sector is still significantly low, but this will soon change." He predicts that the remaining companies planning to go public will optimize their business portfolios, while carefully evaluating leverage levels and tenant concentrations before raising funds from public investors. However, the high debt burden of data center companies may make investors cautious and carefully allocate their investments to their IPO targets. Edward Byun, head of global technology equity capital markets at J.P. Morgan, said, "The market is still looking for reasonable leverage levels for some companies. These companies are mostly expanding rapidly, with different debt structures, so leverage levels will be a key focus for investor due diligence, and valuation judgments across the market are still evolving." The data center industry has a huge capital investment demand, with current industry financing heavily reliant on the private market. Opening fundraising channels to public investors who are unable to participate in private investments has become an inevitable choice for the industry. Greg Kuhl, Global Real Estate Equity Portfolio Manager at Janus Henderson, said, "The industry urgently needs a large amount of funding to support expansion, and without raising funds through the public market, existing capital will simply not cover all construction costs." In an interview, Kuhl said he focuses on the growth potential, asset value, and location value of various data center companies. The potential investor base for this sector is wide, including traditional REIT investors, growth stock fund managers, and institutional investors in the industrial and infrastructure sectors. West Riggs, head of ECM at Truist Financial Corp., pointed out, "Positioning oneself as a technology company can not only enjoy higher valuation premiums but also attract cross-over investors who originally allocate to the REIT sector." Jones Lang LaSalle (JLL) data shows that Wall Street and large technology companies are heavily investing in data center infrastructure, with investment in this area expected to reach $30 trillion by 2030. Byun of J.P. Morgan analyzed, "As AI reasoning and intelligent AI technologies are progressively commercialized, the market space for data centers is expanding significantly. We predict that industry growth is highly sustainable and has strong appeal to the capital market." The keen willingness of public investors to allocate capital will also help the industry address a major challenge: data center operators continue to expand asset scale, but traditional niche investor groups struggle to meet the demand for large-scale asset acquisitions. By entering the capital market, companies can effectively reduce the financing costs of building new data centers. Kuhl admitted, "In terms of fund size, this is an arena with an extremely large scale, and new projects in the industry are still increasing. For developers and industrial investors, they must free up more funds for new project development and industrial investment by revitalizing some assets to supplement cash flow."