The AI expansion however comes with its own challenges.
Private equity giant Blackstone is constructing a colossal $25 billion empire of data centers in Arizona. The linchpin of this venture is the $10 billion takeover of data center operator QTS in 2021, marking one of the most significant investments in Blackstone’s history.
A strategic bet on the AI revolution
The biggest private equity firm globally will build massive facilities to meet the computing needs of big tech companies. By acquiring QTS, a top data center operator, Blackstone is well-positioned to benefit from the growing demand for digital infrastructure driven by the AI boom.
Following their usual approach, Blackstone spots a growing need for properties in short supply. Using their well-established strategy, a key element of their $1 trillion empire, they invest billions of dollars to build large structures that can fulfill essential computing requirements.
This move has also grown QTS’s portfolio, making it the top provider of leased data center capacity in North America.
QTS: A landlord for tech giants
QTS as a key player in the data center landscape. With the likes of Meta and Microsoft potentially relying on QTS for space and electricity to power machine-learning processes, Blackstone sees QTS as a potential goldmine.
QTS has now become the largest provider of leased data center capacity in North America, measured by megawatts under contract. This is a remarkable leap from its previous ranking at No. 4, just three years ago, as reported by research firm datacenterHawk.
Despite the impressive growth, expanding more is tough because it needs a lot of resources, reported the Financial Review.
QTS expects its finished projects to use a massive six gigawatts of electricity, equal to what around 5 million homes need.
The power shortage problem and community backlash
Power shortages in important areas are a problem, and some sites may need new power lines, possibly causing higher costs for others on the grid.
The FR report further says that QTS has had a tough time getting approval for its big projects, as seen in a recent clash in Manassas, Virginia.
Local residents and conservationists strongly opposed a proposed multibillion-dollar development, sparking a prolonged battle over an 850-hectare data center corridor.
This conflict underscores the inevitable tensions arising from the AI industry’s rapid expansion of data centers, often influenced by the disruptive nature of private equity.
With generative AI creating a need for advanced technology and infrastructure, Blackstone believes those with land and capital will have a significant advantage, says company’s President, Jon Gray.
“QTS is a lens into a very important part of the economy that has a lot of momentum,” Gray says in an interview. “AI will be a powerful force to make lives better.”
Looking ahead, Blackstone and QTS are considering bold moves, including the possibility of acquiring a competitor. The data center journey continues, with legal battles and community pushback in the mix.
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