Will data center capex crowd out private investment?
Interesting perspective from Carlyle's Jason Thomas:
Private investment averages about 18% of GDP but stripping out residential development and the replacement of depreciated equipment and facilities yields a net investment rate of just 3% (roughly $900 billion for the United States today). Given current capex projections, we may soon reach a point where data centers consume virtually all the economy’s net private capital formation. That’s a lot of eggs put into this basket, especially when considering uncertainties about depreciation rates, hardware replacement cycles, and monetization timelines.
And for capital allocators, it's one thing to position a portfolio on the “right side” of a looming technological divide, but quite another to allow its incremental stock, real estate, infrastructure, and credit exposures to become so highly correlated with a single risk factor. Fears of imprudent risk concentration – rather than any skepticism about the expected returns on data center development – may emerge as the binding constraint on the sector’s growth this year.
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