By Isla Binnie and Echo Wang
NEW YORK (Reuters) - Apollo agreed to buy a majority interest in Stream Data Centers (SDC), the alternative asset manager said on Wednesday, in a bet on rising demand for digital infrastructure fueled by artificial intelligence and cloud computing.
Big Tech companies and outside investors are pouring money into data centers as demand for computing power soars. The physical sites for computing machines and other hardware could require spending of up to $6.7 trillion worldwide
by 2030, consultancy McKinsey estimates.
SDC builds, leases, manages and operates huge campuses. It has delivered more than 20 to date and has a pipeline of projects with "multi-gigawatt" capacity, Apollo said in a statement.
Apollo is betting that so-called hyperscalers - large cloud service providers like Amazon, Microsoft and Google - will continue to rely on outside developers to find the land they need to build data centers, get regulatory approvals for it, and secure sources to cover their vast power needs.
"Part of the strategic value of Stream is that we think we can scale them up, and make the company important to each one of the hyperscalers," Trevor Mills, a partner at Apollo, told Reuters.
Those large companies "are always going to have needs and different demand pockets where they're going to need to work with a developer," Mills said.
Meta recently raised the lower end of its annual capital spending forecast by $2 billion to $66 billion–$72 billion, with CEO Mark Zuckerberg pledging to invest hundreds of billions of dollars in AI data centers. Microsoft expects to spend more than $30 billion in its fiscal first quarter alone — a pace that would put annual outlays near $120 billion — while Alphabet has lifted its 2024 capex target to about $85 billion and signaled further increases next year to meet surging AI demand.
Apollo said the deal allowed it to "potentially deploy billions of dollars into next-generation digital infrastructure", but did not disclose the financial terms.
The firm's president Jim Zelter said on Tuesday data centers would require $1.5 trillion in external financing, and $800 billion of this could come from private credit, where Apollo is a market leader.
The International Energy Agency forecasts electricity demand for data centers worldwide will more than double by 2030, surpassing the amount that the entire country of Japan consumes today.
Other asset managers, including Blackstone, KKR and BlackRock, have committed billions of dollars to the sector. Blackstone spent $10 billion to take data center operator QTS private in 2021.
SDC's management team will maintain a minority stake and keep leading the business, Apollo said.
(Reporting by Isla Binnie and Echo Wang in New York, additional reporting by Manya Saini in Bengaluru, Editing by Louise Heavens and Diane Craft)
