Artificial intelligence is increasing the scale and complexity of digital infrastructure required to support modern computing. Data centers, once a specialized segment of real assets, are becoming an increasingly important component of the digital economy, supporting cloud computing, enterprise applications, and AI workloads.
For ultra-high-net-worth (UHNW) investors, data centers potentially represent a compelling investment within private markets, shaped by accelerating demand against currently constrained supply.
AI Demand and the Expansion of Data Center Capacity
AI workloads are contributing to increased demand for compute power and data storage. Training and operating large-scale models require significantly more infrastructure than traditional applications, leading to higher utilization across hyperscale data centers.
As a result, global data center demand is projected to increase materially through 2030, growing from approximately 55 gigawatts in 2023 to as much as 219 gigawatts, a 22% compounded annual growth rate (CAGR).¹ This trend reflects the rapid growth of commercial AI adoption, but also continued cloud computing expansion and broader enterprise data usage.
Large technology platforms, including cloud providers and AI developers, are primary users of this capacity, often entering into long-term contractual arrangements that support facility utilization.2
Supply Constraints and Market Dynamics
While demand has increased, new supply has been constrained by structural limitations. Data center development depends on access to power, land, and network connectivity, which may be limited in key markets.
This dynamic has contributed to the importance of established “cloud availability zones,” where infrastructure density and access to power create higher barriers to entry and potentially more desirable investment characteristics.2
Power availability itself has become a central consideration. Grid interconnection limitations, permitting timelines, and competing energy demands may influence development timelines and project feasibility.
Capital Intensity and Development Considerations
Data centers are also capital-intensive assets to develop. Construction typically requires substantial upfront investment in land, power infrastructure, and specialized equipment, often prior to revenue generation.
Projects may involve extended timelines, complex permitting processes, and ongoing operational costs tied to energy consumption and maintenance. These factors can increase execution complexity and influence return variability across investments.
Access to power, contracts with large tenants, and the ability to manage construction and operations effectively are factors that may influence outcomes.3
A Hybrid Asset Class
Data centers exhibit characteristics commonly associated with multiple asset classes.
From a real estate perspective, they involve physical ownership of land and buildings, often supported by long-term lease agreements. From an infrastructure standpoint, they provide essential services that support digital systems and communication networks. At the same time, they are influenced by technological change, including hardware evolution and efficiency improvements.
This combination has led many investors to evaluate data centers as more growth-oriented infrastructure, requiring consideration of both real asset and technology-related factors.
Portfolio Role and Investment Considerations
For UHNW investors, data centers are often evaluated within the context of diversified portfolios. Key considerations may include:
- Return drivers: Long-term contractual agreements, supply-demand dynamics, and operational performance
- Duration: Typically long-term, with extended development and holding periods
- Potential Illiquidity: Private market structures offer limited liquidity and exit flexibility
These characteristics may be considered alongside traditional real estate and infrastructure exposures when constructing diversified portfolios.
IEQ Capital’s Perspective
At IEQ Capital, we view AI-driven digital infrastructure as an evolving segment within private markets, influenced by observed demand trends and supply constraints. The sector reflects the intersection of real assets and technology, requiring careful evaluation of development capabilities, access to critical resources such as power, and tenant relationships.
Investment considerations in this area are typically aligned with broader portfolio objectives, including diversification, liquidity planning, and long-term asset allocation frameworks.
Conclusion
Data centers are fast becoming a foundational component of both the digital and broader economy, supported by increasing compute requirements and constrained development conditions. For many UHNW investors, these assets are often evaluated as part of a broader private markets allocation, given their long-duration profile and hybrid characteristics.
As with all private market investments, outcomes are dependent on multiple factors, including execution, market conditions, and manager selection.