Digital Infrastructure
Stay informed with S&P Global Ratings research examining digital infrastructure trends, including data centers, AI-related infrastructure, cloud computing, connectivity networks, and cyber risk, as well as technologies influencing digital transformation.
Digital Infrastructure Financing: Perspectives on AI and Cloud Growth
Digital infrastructure refers to the network of data centers and systems supporting today’s connected economy. According to S&P Global Ratings research, demand for these assets has increased alongside the growth of AI applications, cloud computing, and broader digital activity. Market participants have highlighted a range of financing approaches, including private credit, used to support the development and expansion of digital infrastructure assets.
Analysis from S&P Global Ratings
S&P Global Ratings provides insights and analysis on the evolving digital infrastructure sector. Our analysts examine growth considerations, credit quality factors, and risks influencing the development of AI- and cloud-related technologies.
Explore our coverage to gain insight into how our analysts assess potential credit implications associated with digital infrastructure growth, including rating approaches applied across corporate, project finance, and structured finance criteria.
Digital Infrastructure Trends
We provide perspectives on digital infrastructure trends and their potential effects on credit.
Data Centers
Trends in AI-driven demand, capacity expansion, energy consumption, financing, operational resilience, and the evolving role of data centers in supporting the digital economy.
Cloud Computing
Cloud computing trends, including enterprise adoption, hyperscaler growth, competitive dynamics, and the expanding role of cloud platforms in digital transformation.
AI
Perspectives on the impacts of AI on data center demand, compute requirements, cloud expansion, semiconductor supply chains, and the evolving investment-related, scalability, and risk dynamics assessed in AI-enabled infrastructure.
Cyber
Analyses of cyber risk within digital infrastructure, including evolving threat landscapes, enterprise risk management considerations, regulatory and compliance developments, and the growing importance of secure networks.
Networking
Developments in fiber and wireless connectivity, bandwidth demand, edge computing, latency reduction, and the role of network expansion in enabling cloud services, AI workloads and global data transmission.
Governance
Evolving standards of oversight, enterprise risk and accountability frameworks, regulatory and compliance developments, and the growing importance of transparency, operational resilience, and responsible technology stewardship in supporting cloud, AI, and interconnected digital systems.
How We Rate Data Centers Across Public And Private Markets
- Private credit is emerging as a key funding source for data center transactions.
- Our rating approach is determined by the transaction's characteristics, relying on our criteria for corporate finance, project finance, and structured finance.
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Criteria
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Structured Finance
Structured Finance Criteria for Data Center Securitizations
We use these criteria to analyze data center securitizations (see Appendix 1 for further details on scope). Data center securitizations are transactions backed by income generated from data center operations. When the issuer owns the related properties, the transactions also benefit from the proceeds arising from their sale. In general, we analyze both the recurring lease income and proceeds related to property sales. For issuers that don't own the data centers or corresponding land, only the recurring revenue streams are analyzed because noteholders have no recourse to the physical assets; instead, issuers are assigned both real estate leases and tenant contracts.
For each transaction, we analyze exposure to events that could interrupt or reduce the expected cash flow, including factors that could impede finding new tenants or selling properties. We make assumptions regarding:
- The value of properties at the time of sale;
- Revenue streams from contracts signed after closing; and
- Tenants' ability to meet their contractual obligations.
Although transactions are often refinanced at the anticipated repayment date (ARD), which are typically five to seven years after closing, the time to maturity is longer (up to 30 years). Our analysis extends to the legal maturity of the liabilities because there is no obligation to redeem the liabilities at the ARD. Typically, bond amortization is accelerated after the ARD.
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Corporates
Corporates Criteria for Digital Infrastructure
Under our "Methodology: Industry Risk," digital infrastructure companies have an industry risk score of 2 (low risk), which reflects the sector's low cyclicality and low competitive risk and growth assessment.
Historical information to evaluate cyclicality and analyze the industry's performance during recessions is more limited than that for other industries. Given the industry's rapid development globally since 2000, we expect to have more relevant peak-to-trough data in future years. Until then, based on the industry dynamics demonstrated so far, and the cyclicality assessment assigned to the sectors (utilities, infrastructure, real estate, and telecommunications) that we see as its closest peers, we assess cyclicality in the digital infrastructure industry as low risk.
We assess competitive advantage in the digital infrastructure sector based on:
- Market position and competitive environment
- Contractual framework and regulation
- Asset quality
- Quality of customers
Market position and competitive environment: The competitive advantage of a digital infrastructure company is heavily influenced by its position in the markets in which it operates. This generally depends not only on the company's market share but also on the existence of barriers to entry. These stem from:
- The need for high upfront investments
- The lack of available alternative sites
- Elevated switching costs
- The difficulty of replicating coverage
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Project Finance
Project Finance Criteria
Project finance is a technique used to finance capital-intensive assets. In a project finance transaction, one or more limited-purpose entities (LPEs) collectively undertake the construction and/or operation of assets, mostly in the infrastructure sector. We refer to the underlying business undertaking and the financial structure that supports it as "the project." Other terms are defined in the glossary.
Transactions rated under these criteria share the following characteristics:
- The project's debt is primarily serviced and repaid using the project's cash flows--specifically, the cash flow available for debt service (CFADS), generated by the operation of the project assets. Debtholders have limited or no recourse to the project sponsors or shareholders.
- Debtholders typically have a senior security interest over the project assets and cash flows.
- The cash management structure determines the priority of payments.
- A set of covenants establishes what the project can and cannot do during its life.
The key attributes of the project finance transactions in scope of these criteria are defined in section 2. Some entities share some, but not all, of the project finance characteristics and are rated under different criteria. These include corporates, project developers, structured finance issuers (including corporate securitizations), and public finance issuers.
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