Did Claude just buy a bachelor pad?

The growth of AI is often likened to the industrial revolution for the way it is reshaping economies. Just as the steam engine mechanised 19th century labour and drove industries to unprecedented heights, AI is automating the 21st century and reshaping economies at a groundbreaking pace.

In what is sometimes, if you want to be fancy about it, referred to as the AI renaissance, this groundbreaking is also a physical one, and it could be coming to a neighbourhood near you as AI increases investment into itself.

One of our recent articles covered the ongoing debate around the land, space and power requirements of data centres. Emerging from this are discussions over whether AI infrastructure could become an investable asset class in its own right.

Just as investors can put money into a toll road, a tunnel or an airport, should they also put funds behind the bricks, mortar and intricate cabling of an asset that is literally powering growth and innovation?

Some big investing names think digital infrastructure is an asset worth backing, and they’re putting it into play – in a big way.

In the United States, hefty Wall Street players Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR are working alongside technology firm NVIDIA in a US$500bn deal to finance digital infrastructure development. This "data centre splash" of cash involves multilayered deals encompassing private credit, bond and project finance to provide dedicated pools of capital to build, develop and support the AI factories of the future.

Audrey Symes at EMM Research observes that breaking new ground into AI as an asset class also requires the right people to successfully negotiate it:

"The $500 billion commitment from Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, KKR and NVIDIA is the capex side of a story we track from the talent side, where the people capable of deploying capital are scarce. In our K-shaped economy, highly-trained professionals, with experience, judgment and relationships to offer, are being aggressively courted by banks, private wealth shops, and secondaries platforms all hoping to capture as much upside of this capex as possible. At EMM Research, our view is that the firms that capture the most value from this wave will be the ones that can most quickly redesign job descriptions, comp structures, and org charts for success in this new, more bifurcated financial landscape."

In Australia, a recent partnership between Anthropic, Macquarie Asset Management and GIC will utilise the Theseus Infrastructure platform to fund, build, operate and lease data centre infrastructure. The platform’s aim is to develop new data centre sites for which Anthropic will be the anchor tenant. Developments will initially be US based, with a focus firmly on Australian locations – with Anthropic signalling its intent to buy and build out Australia’s available data centre capacity by mid-2027.

Daniel Yee, who leads the JMES Real Assets practice added that the right guidance is vital to a successful build out.

The growth of AI and its affiliated infrastructure represents an opportunity here in Australia where the domestic economy is mired in inflationary and cost-of-living pressures and productivity levels that remain obstinate in their lack of growth.

As always, challenges will rear their head, not least the difficulties associated with effectively capturing the economic benefits that developing data centre infrastructure promises to bring. Capital commitments from sophisticated investors and government entities are all well and good, but provisions have to be made to ensure that we have not only the right energy and regulatory framework in place but also the skills, domestically, to remain relevant and value-add in all facets of data centre development, investment and operation.

We don't want to simply remain a passive end-user and observer of a gold rush already in process.

The rise of the data centre continues to build, bringing with it a lot of moving parts. Once manoeuvred into place, those moving parts become a lucrative investment, as well as an increasingly necessary one. Also necessary is having the right people in place to successfully execute and manage the investment, combining skills and experience across M&A, debt, private credit, engineering and beyond.

So, it looks like Claude might be getting that bachelor pad after all - and sooner rather than later. While plans are being made about where to put the pool table and whether or not to invite Monica over for a drink, not everyone is keen on data centres splashing into their backyard, and definitely not in the western suburbs of Melbourne where locals refer to one of a number of enormous AI factories as “Mordor”.

Sorry, Claude. You shall not pass.

Want to know more about what we’re seeing in the market? Get in touch with the JMES team: https://www.jmes.com.au/our-people

More about EMM and Jackson Lucas.