Data Centers and Digital Infrastructure

Data Centers and Digital Infrastructure covers assets like hyperscale/colocation data centers, edge facilities, fiber networks, towers, and related connectivity systems. Allocators like the combination of secular demand growth and infrastructure-like cash-flow characteristics—but underwriting is only “defensive” when contracts, power, and execution are truly durable.

This is not generic infrastructure: the risk stack includes power availability, interconnection value, customer concentration, technology transition, and continuous capex requirements. The best opportunities show clear differentiation: location and power, density, network effects, and a credible leasing engine.

How allocators define digital infrastructure risk drivers

• Contract quality: term, pricing escalators, renewal behavior, termination rights
• Customer concentration: single hyperscaler exposure vs diversified colocation
• Power & cooling constraints: deliverability, utility timelines, upgrade costs
• Uptime & operations: redundancy tiering, incident history, operator maturity
• Capex cadence: refresh cycles, efficiency upgrades, expansion capex
• Site economics: land, permitting, interconnection, latency advantages
• Exit buyer universe: strategic vs financial buyers, rate sensitivity

Allocator framing:
“Are we buying contracted infrastructure—or underwriting a continuous development machine?”

Where it matters most

• portfolios seeking growth-linked real assets without pure venture risk
• mandates with explicit sleeves for digital infrastructure or AI-enabled demand
• markets where power scarcity creates durable pricing power

How it changes outcomes

Strong discipline:

• produces scalable platforms with repeatable leasing and expansion
• protects downside through contract structure and operational reliability
• improves forecasting via visible capacity pipeline and signed pre-leases

Weak discipline:

• returns depend on speculative expansions without secured power or demand
• capex creep and downtime risk degrade realized cash yields
• customer concentration creates binary renewal and repricing outcomes

How allocators evaluate discipline

They trust managers who:

• separate contracted cash flow from pipeline optionality clearly
• show power procurement/queue position and realistic energization timelines
• provide uptime metrics, incident postmortems, and redundancy standards
• demonstrate renewal history and pricing outcomes by customer cohort

What slows decision-making

• opaque power strategy and permitting dependencies
• inconsistent definitions of “leased,” “reserved,” and “under negotiation”
• unclear capex responsibilities (landlord vs tenant)
• aggressive assumptions about future density and pricing

Common misconceptions

• “Demand growth guarantees returns.” → Without power and contracts, growth is a story.
• “Data centers are pure infrastructure.” → They require active operations and ongoing capex.
• “Edge is always safer.” → Edge can be demand-fragmented with weaker tenant quality.

Key allocator questions during diligence

• What portion of revenue is secured under long-term contracts today?
• What is the power timeline and what breaks if energization is delayed?
• How concentrated is cash flow by top tenants and renewal dates?
• Who pays for capex upgrades and what is the annual capex load?
• What is the operational track record—uptime, incidents, and recovery?