Private equity investment surge sends US data center deals to 5-year high

As AI drives unprecedented demand for data centers, private equity investors are pouring billions into digital infrastructure.

Private equity investment in US data centers jumped to $45.70 billion in 2025, the highest total in at least five years. This accounts for 72% of the overall $63.35 billion investment in the nation's data center space, including transactions not backed with private equity, according to S&P Global Market Intelligence data.

The private equity-backed investment total was driven by one deal: the planned $40 billion acquisition of Aligned Data Centers LLC by a group of investors including MGX Fund Management Ltd., Global Infrastructure Management LLC, Microsoft Corp., X.AI LLC, NVIDIA Corp., Temasek Holdings (Pvt.) Ltd., Kuwait Investment Authority and BlackRock Inc.

"We're at the beginning of a data center supercycle development process," said Curt Holcomb, vice chairman of JLL Data Center Solutions.

A supercycle in data center development refers to a prolonged, deep development phase lasting three to five years, driven by a severe supply-and-demand imbalance in which demand significantly exceeds available supply, Holcomb said.

This cycle was intensified by COVID-19 logistics disruptions that further delayed supply development. The phenomenon attracts massive capital investment, scaling from billions to trillions of dollars, representing an abnormal period requiring extensive infrastructure build-out to meet current market demands, he said.

Major financial industry players, including Blackstone Inc., Apollo Global Management Inc. and BlackRock, have aggressively entered the US data center market over the past five years, joining traditional institutional lenders and pension funds, Holcomb said.

The private equity giants are deploying capital through both direct corporate acquisitions and real estate financing, Holcomb said.

Blackstone made its largest single investment in the sector before the AI phenomenon spread worldwide. In 2021, the firm acquired QTS Realty Trust LLC, one of the world's largest colocation developers, for $10.0 billion.

"Blackstone has become the largest investor in AI-related infrastructure in the world," Blackstone co-founder, Chairman and CEO Stephen Schwarzman said during the firm's first-quarter earnings call in April.

"Our total portfolio now consists of over $150 billion of data centers globally, including facilities under construction, and it continues to grow rapidly with an additional $160 billion in prospective pipeline development," Schwarzman said, adding that the firm also "filed to launch a new public company that will acquire stabilized newly constructed data centers, leveraging our deep expertise in this area."

Investment risks

Industry experts said this capital surge comes with significant risks — ranging from immediate execution challenges and power constraints to longer-term uncertainties around shifting demand dynamics.

"Execution risk is probably the largest risk that I see for the industry," said Gordon Bell, principal for strategy and execution at EY-Parthenon. "The industry has signed up and committed to a build-out at a scale and speed that we've never seen before. No operator has executed that before."

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Another pressing challenge is what industry insiders call "speed to power." A fundamental mismatch exists between developers seeking rapid deployment and utilities operating on 30- to 40-year asset timelines, creating severe timeline risks that directly impact investor returns.

"We're increasingly seeing data center projects get delayed over time, and those delays result in the chips not getting turned on at the right time, which leads to revenue not coming in the door on schedule as people had previously underwritten," Bell said.

Beyond infrastructure challenges, Bell highlighted what he considers "the most underdiscussed risk"— the paradox that supply constraints, while preventing speculative overbuilding, also "restrict the rate of growth for the industry."

More critically, longer-term market risks revolve around AI's "natural product market fit cycle," or whether AI products will actually become popular and profitable enough to justify such major infrastructure investment.

"There's a handful of hyperscalers, there's a handful of large frontier AI labs that are all participating in this market and consider it existential. They're all investing as if they're going to have a business in this space 10 years from now. That may not be the case. There may be some consolidation along the way, winners and losers," Bell said.

US data center hubs

The US has 3,988 data centers as of the third quarter of 2025, according to data from 451 Research from S&P Global Energy Horizons. Of the total, 2,615 are operational, 1,108 are planned, and 265 are under construction.

Virginia remains the capital of America's digital infrastructure, with 757 total data centers, including 382 operational facilities and 306 more in the planning stages.

However, other states are preparing to capture the next wave of digital growth. While Virginia's planned facilities ensure its continued dominance, the combined pipelines of Ohio, with 111 planned and under construction, Arizona, with 102, and Georgia, with 97, signal a dramatic decentralization of cloud computing infrastructure.

451 Research is a technology research group within S&P Global Energy Horizons.