WSS: Hyperscale landscape still in motion as neoclouds and AI labs keep building, while CapEx investments, capital raising continue unabated
The past week saw significant activity in hyperscale leasing and development as demand continues to outpace supply in a constrained environment. By definition, hyperscale is a narrow demographic, but the field is widening and creating more tailwinds for data centre infrastructure demand. And the main accelerant for hyperscale demand is having a cloud computing infrastructure business. This is something that even the likes of Apple have contemplated in the past, and during Meta’s recent shareholder meeting, CEO Mark Zuckerberg was asked if this was an option in light of the massive CapEx investments being made in server and data centre infrastructure. We have some analysis of the comments, but the short answer is that it was not a straight or emphatic no. But at least for now, the Meta Compute initiative still appears to be focused on supporting various AI products and services currently in development.
There was meaningful hyperscale leasing activity in the past week. Applied Digital signed a second lease with its investment-grade hyperscale customer at the Delta Forge 1 campus (reported to be in Louisiana), but in North Dakota where Polaris Forge 3 will be built (Polaris Forge 1 and Polaris Forge 2 are leased to other tenants). Just as this was confirmed, that same hyperscale customer expanded its commitment and signed a third lease for Delta Forge 2. The leases are in the hundreds of megawatts and show the level of execution and time-to-market expectations that need to be met in order to be successful in the current market environment.
Neocloud and AI platforms continue to lease capacity and Mistral AI in France confirmed it would take down an initial tranche of 10MW with Digital Realty in Paris. Mistral is also building out a cloud computing service and is targeting capacity in Europe of about 200MW by 2027. Meanwhile, the Stargate initiative involving Oracle and OpenAI has seen a few starts and stops, but the directional momentum continues to be in a forward direction. The Stargate Michigan project, involving data centre developer Related Digital, broke ground recently and reported progress being made on construction.
The week also saw a flurry of activity around financing as operators continue to look for capital to support expansion initiatives built on healthy customer demand and intensifying requirements. Rowan Infrastructure secured $3b for a campus in Texas, while AtlasEdge and Pure DC raised funds for European projects, DC BLOX expanded its green loan financing and Edged closed on $2b to support builds across the US.
CapEx is another good indicator to benchmark demand against, and in APAC, CapEx commitments are seeing upticks. Alibaba Cloud confirmed on its recent earnings call that it would likely surpass its CapEx projection of $50b over the next years, while ByteDance is reported to be possibly at least doubling its CapEx commitment in just the next year. The investment levels bode well for demand as the Chinese hyperscale platforms are not self-building anywhere in the region outside of China.
Finally, there was some strategic activity of note. Anthropic has filed its confidential S-1 as it works towards an IPO, and we await some of the details in the filing around data centre and cloud infrastructure consumption levels. In the US, we saw two transactions of note. Flexential acquired ownership of two data centres in Hillsboro, Oregon as operators continue to see ownership of the underlying data centre real estate as an asset and selling point. And DartPoints acquired an enterprise data centre in Lexington, Kentucky that it plans to convert to a data centre colocation campus. The deal speaks to the opportunity in secondary markets where enterprise assets are under-utilized but have the potential to be re-purposed for traditional and next-generation workloads. The enterprises are not going to do it and it makes sense that an operator with capital and scale takes on the investment.
or