Equinix Raises $15 Billion in New Capital to Invest in xScale Data Centers to Meet AI Demand

Equinix has raised $15 billion to expand its xScale data centers for AI, particularly for investments in the United States.

Equinix, based in Redwood City, California, has built one of the Internet’s foundations with data centers around the world. I visited a secret site once and was amazed at the size of the places housing tons of servers, cables and cooling systems – and they’re about to get bigger and more numerous.

Krupal Raval, general manager of xScale data centers at Equinix, said in an interview that the digital infrastructure company has finalized the signing of a joint venture agreement, raising more than $15 billion in capital with its partners. The exact distribution of equity and debt remains to be determined.

The limited liability company — subject to closing in the fourth quarter — includes GIC and Canada Pension Plan Investment Board (CPP Investments).

“The $15 billion announcement is frankly associated with the scale of the opportunities and the actual projects that we are targeting,” Raval said. “That’s one of the points behind the $15 billion, and the second piece is that partnerships are critical to that equation.”

Raval noted that the xScale data centers and the plan behind them were developed five years ago and that there had already been $8 billion in financial commitments prior to today’s announcement . GIC has supported expansion in the past, and now RPC is joining in to invest further in North America.

“We believe this is a testament to the health of our partnership and our excellent working relationship. So we are more than happy that GIC continues to double down. I guess that triples in this project. But in addition to GICs, we also have CPP as a new investor. And the reason is because the scale of the opportunity is so large that we thought it was prudent to bring in multiple investors.

Driven by the growing growth of artificial intelligence (AI) and cloud, the joint venture aims to accelerate the Equinix xScale data center portfolio, which enables large-scale enterprises to add core deployments to their point footprints existing access networks in Equinix International Business Exchange (IBX) data centers. . Once fully constructed, this new joint venture will nearly triple the investment capital of the Equinix xScale program.

Raval noted that the xScale program already represents an $8 billion capital commitment, and that additional $15 billion will be invested in the United States to build data centers to meet the demand for AI, primarily in the United States.

“This will change everything,” Raval said. “We are only in the early stages of AI. Everyone is talking about it as the most important technological change in generations.

With the capital raised through the joint venture, Equinix expects the joint venture to purchase land to build new state-of-the-art xScale facilities on multiple campuses of more than 100 megawatts (MW) in the United States, ultimately adding more than 1,000 megawatts (MW) 5 gigawatts of new capacity for hyperscale customers.

Equinix has a long-standing relationship with GIC, having previously collaborated on xScale projects in Asia, America and Europe (see links below for details on other joint ventures). This agreement represents the first joint venture between Equinix and CPP Investments, which manages Canada Pension Plan assets for more than 22 million contributors and beneficiaries.

Under the terms of the agreement, RPC Investments and GIC will each control a 37.5% stake in the joint venture, and Equinix will hold a 25% stake. Each party has made equity commitments, and the joint venture also plans to take on debt to bring the total pool of investable capital to more than $15 billion over time.

Equinix’s existing hyperscale joint venture portfolio in Europe, Asia Pacific and the Americas has a committed investment of more than $8 billion, which is expected to result in more than 725 megawatts of power capacity in more than 35 facilities once fully constructed.

Platform Equinix provides nearly 40% of private access to the world’s leading cloud service providers, more than any other provider. As large-scale enterprises expand their operations at Equinix, the ecosystem of more than 10,000 enterprises and other companies currently operating at Equinix can benefit from increased opportunities to directly connect and operate in proximity to the world’s largest cloud operators .

xScale data centers meet the unique workload deployment needs of the world’s largest cloud service providers, including hyperscalers, who are key players in the AI ​​ecosystem. These companies can add core deployments to their existing access points in Equinix IBX data centers, enabling their growth on a single platform that can immediately cover 72 global metropolises and provide direct interconnection to an ecosystem of more than 10,000 customers.

Equinix said it is committed to providing sustainable digital infrastructure and engaging its suppliers and partners in supply chain responsibility. Equinix has continued to advance the way it designs, builds and operates its data centers with high energy efficiency standards, and all xScale data centers will be LEED certified (or certified in the regional equivalent).

Raval said the company maintains the highest standards in its sustainable approach to building its data centers.

“This is an industry benchmark in terms of our stance and commitment to sustainability,” he said. “For many years we have been committed to being 100% clean energy based. By 2030, we have science-based targets, and we are pioneers in many of these areas.

Closing of the joint venture is subject to receipt of required regulatory approvals, which are expected to be received in the fourth quarter of 2024. Morgan Stanley served as exclusive financial advisor to Equinix in connection with this transaction.

“As the world’s largest enterprises expand their infrastructure to support key workloads like artificial intelligence, they need to combine large-scale data center footprints optimized for AI training and interconnecting nodes for the most efficient inference,” Adaire Fox-Martin, CEO of Equinix, said in a statement. “Our xScale and IBX offerings are uniquely positioned to meet this business need, enabling businesses to realize the powerful potential of AI. »

Goh Chin Kiong, chief investment officer for real estate at GIC, said in a statement: “We are proud to extend our multi-year partnership with Equinix, meeting massive and growing demand for digital infrastructure, driven by rapid advances in technology. including AI. GIC’s capital and scale, combined with Equinix’s operational expertise, have generated significant value in our joint investments. Through this joint venture, we look forward to providing the financing necessary to develop cutting-edge digital infrastructure across the United States alongside our like-minded partner, RPC Investments.

Max Biagosch, senior managing director of RPC Investments, said in a statement: “RPC Investments has been investing in data centers for several years and we have developed strong expertise in this area. This investment will help meet the growing demand for data centers driven by rapid technological advancements and marks a significant step forward in our broader data center strategy. We are pleased to partner with Equinix and GIC to generate strong long-term risk-adjusted returns for the CPP fund.

Raval noted that Equinix invests several billion dollars in capital expansion in normal years.

“I don’t think we should necessarily limit ourselves to the story, whatever that is. I think we have the capacity to do more,” Raval said.

In total, the xScale commitment now stands at approximately $23 billion. Raval considers a data center as a “product”. This represents approximately 20 gigawatts of energy required to operate these data centers.

“We designed a flexible product that can accommodate liquid cooling and cover the entire range,” he said.

I asked if Nvidia’s belief in the advent of sovereign AI, in which countries recreate their data infrastructure to ensure they own their own data, was a reason. And he said, in short, yes.

“I think AI is going to develop everywhere,” he said. “This particular announcement focuses on the United States, as we believe the largest growth market for AI will be the United States.”

Equinix expects an unspecified number of hires related to this project, which will include construction jobs. The company has already acquired its first xScale data center site in the United States, which will support 240 megawatts of power in the Atlanta area.