Equinix Continues Big Tech Pivot With $15B Data Center JV

Data center REIT Equinix has signed a development joint venture with Canada Pension Plan Investment Board and Singaporean investment firm GIC to build hyperscale data centers, the latest move in the firm’s monthslong push to cash in on Big Tech’s artificial intelligence data center arms race. 

Equinix plans to raise more than $15B through the JV, which the firm announced Tuesday. The partnership plans to acquire land and build data centers that are ultimately expected to surpass 1.5 gigawatts of inventory. It would expand the company’s xScale portfolio of data center campuses for hyperscale cloud tenants like AWS, Microsoft and Google. 

According to Equinix, at full buildout the JV will nearly triple the investment capital of the xScale program. It’s a significant expansion of the company’s hyperscale offering that Equinix leadership explicitly framed as supporting AI workloads for the largest tech firms. 

"As the world's leading companies build out their infrastructure to support key workloads such as artificial intelligence, they require the combination of large-scale data center footprints optimized for AI training and interconnection nodes for the most efficient inferencing,” Equinix CEO Adaire Fox-Martin said in a statement Tuesday. “Our xScale and IBX offerings are uniquely positioned to address this business need, enabling companies to realize the powerful potential of AI."

Equinix is the world’s largest data center REIT, with more than 260 facilities globally. The firm’s business model has traditionally focused on retail colocation and other multitenant business lines. 

But in recent months, Equinix has ramped up its development efforts focused on the hyperscale market and signaled plans to expand its xScale portfolio, which the REIT builds exclusively through joint ventures.  

Equinix leadership told investors in August that the company planned to accelerate investments in “meaningfully augmenting and extending our xScale portfolio.” As of August, 15 of the development projects the firm had underway were part of its xScale program. Equinix's existing hyperscale joint venture portfolio in Europe, Asia-Pacific and the Americas has a committed investment of over $8B, which is expected to result in more than 725 megawatts of capacity across more than 35 facilities at full buildout.

Much of Equinix’s recent xScale expansion has focused on the U.S., where the company didn't have any such facilities until earlier this year. The company’s first U.S. hyperscale buildout, a 14-megawatt data center in San Jose build through a $600M JV with PGIM, opened this spring. 

Equinix also said in August it had closed on land and power for a larger xScale project in Atlanta. The company has provided few details other than the project will have hundreds of megawatts of capacity, the largest in the firm’s portfolio.

With its growing hyperscale pipeline, Equinix appears to be ramping up its push into the market for the increasingly massive campuses that are spearheading an unprecedented wave of global data center development. Demand for ever-larger campuses with access to hundreds of megawatts of power has exploded over the past 24 months, as cloud providers and social media giants scramble to secure the infrastructure to support the development and training of energy-intensive generative AI models. 

It’s a space that has largely been the realm of self-development by the world’s largest tech companies or private third-party developers backed by institutional capital, companies like Stack Infrastructure, PowerHouse Data Centers and Compass Datacenters. 

“We continue to believe this off-balance-sheet JV structure with our equity partners is the right model to pursue this significant opportunity,” Equinix Chief Financial Officer Keith Taylor told investors in August.

Still, Equinix’s leadership has indicated they are not shifting away from the multitenant facilities in high-demand markets and enterprise-focused business lines that have been the firm’s bread and butter. Ultimately, they say, their enterprise-focused colocation businesses will be the biggest beneficiaries of the AI revolution.

For now, the major cloud providers are driving the vast majority of AI adoption, and their cloud-based AI services will likely continue to account for a significant percentage of corporate spending on AI. So, for the moment, Equinix is leaning into Big Tech’s insatiable appetite for capacity to ensure the company can catch what may be a once-in-a-lifetime demand wave while it waits for its long-term business case to emerge. 

“In the context of AI and AI demand, that initial short-term demand is coming, indeed, from the service providers,” Fox-Martin said on the company’s third-quarter earnings call this summer. “But many CIOs … are looking to ensure that they have an AI strategy, and we are beginning to see the beginnings of enterprise training and enterprise funnel as customers look to evolve their strategy into proof of concept and beyond that into working production systems.”