Major financial institutions and investment firms are positioning themselves for what could be a massive expansion in artificial intelligence infrastructure, with projected investments of at least $1 trillion - though some experts urge caution.
According to Bloomberg, Wall Street sees the next big tech expansion coming: building out AI infrastructure will require at least $1 trillion in investments for data centers, power systems, and network infrastructure. Some estimates suggest the total could reach $2 trillion.
KKR calculates that a single one-gigawatt data center costs about $12 billion to build. OpenAI's Sam Altman proposes even larger facilities of five gigawatts - enough power for multiple major US cities. Several US states are already planning massive AI data centers, with projected costs exceeding $100 billion each.
Financial institutions are moving quickly to capture this opportunity. Sources told Bloomberg that JPMorgan Chase and Deutsche Bank have created dedicated teams focused on AI infrastructure. One banker, speaking anonymously, said their firm can barely process all incoming data center deals.
BlackRock has announced plans to partner with Microsoft on data center and energy infrastructure investments worth up to $120 billion.
Investment giants Apollo, KKR, and Blackstone are also entering this space. Blackstone plans a $13 billion data center in northern England. The potential returns are significant - London data centers show profitability around 65%, according to real estate research firm Green Street.
A lot of capital will be wasted
Some experts warn about potential risks. MIT professor Daron Acemoglu told Bloomberg, that a lot of capital will be wasted. A senior private equity executive expressed concerns about speculative construction of data centers without confirmed tenants.
Investment firms point to tech companies' financial strength as security. "Those dollars are going to be spent and I think the sponsors of this technology, which are largely the hyperscalers, have very, very, very deep balance sheets," Apollo partner Rob Bittencourt told Bloomberg. "I think that is going to give a durability to the trend and instill a patience, if you will, versus other technology cycles we've seen."
Power infrastructure poses significant challenges. Irish grid operators warn that data centers might need to relocate due to capacity limits. Virginia, which has the world's highest concentration of data centers, broke its peak load record six times in July alone.
This massive investment wave could transform digital infrastructure - if AI development meets optimistic projections. If not, it risks becoming one of the largest misallocations of capital in recent history.
