The US market, initially overlooked, proved more dynamic for infrastructure investors. Unlike global markets dominated by rigid government auctions, the prevalence of privately-owned US assets allowed for creative structuring, exclusive negotiations, and relationship-based deals, avoiding a pure 'cost of capital shootout'. This model of sourcing has now become the global standard.
The 2008 financial crisis triggered a fundamental shift in infrastructure investing. The pre-crisis model, driven by investment banks, prioritized deal velocity. The post-crisis rebirth adopted a private equity mindset, emphasizing deal quality, rigorous diligence, and a strong bias against doing a deal. This cultural change was essential for the asset class's maturation.
While essential infrastructure assets are almost guaranteed to be more valuable in ten years, their path is never a straight line. Investors must structure financing to withstand inevitable downturns, such as the GFC or COVID. As Warren Buffett says, 'a string of great returns followed by a zero is a zero,' highlighting the need for resilient capital structures to capture long-term value.
To navigate the AI boom, Stonepeak assesses data center risk with a two-axis matrix: customer creditworthiness (e.g., Google vs. OpenAI) and location desirability (e.g., Northern Virginia vs. a remote farm). This framework clearly distinguishes between a safe, long-term contract with a tech giant in a prime market and a speculative bet on a cash-burning startup in an unproven location.
For three decades, US power demand was stagnant due to energy efficiency and offshoring. The AI build-out has abruptly ended this era, driving unprecedented ~5% annual growth. This demand shock has created a massive bottleneck in the supply chain for critical hardware, with a new power generation unit ordered today not expected for delivery until 2029.
In the current market, buying existing data center platforms means accepting very low cap rates of 2-3%. Stonepeak sees a better risk/reward proposition in building new capacity. This strategy, while slower and more complex, can deliver much higher returns—such as 9-10% cap rates in the US—with strong, long-term customer contracts secured from the outset.