DataBank nets $250M equity investment

The global data center market is experiencing unprecedented growth, fueled by surging demand for artificial intelligence (AI) infrastructure. Just last week, OpenAI announced plans to collaborate with major backers, including SoftBank, to invest at least $100 billion in data center infrastructure in the United States. Similarly, Microsoft has committed approximately $80 billion this year toward expanding its AI infrastructure, with other tech giants following suit.

The Data Center Boom and Key Players

As the AI revolution unfolds, companies specializing in high-performance, compute-ready data centers are emerging as major beneficiaries. One such company is DataBank, which recently secured $250 million in investment from private equity firm TJC and an additional $600 million in a secondary share offer. The funding reinforces confidence in DataBank’s business model and growth trajectory.

Raul K. Martynek, CEO of DataBank, emphasized that the fresh capital “signals both confidence in our strategy and our proven ability to execute and scale.”

Founded in 2005, DataBank has grown substantially through strategic acquisitions. The company was acquired in 2016 by a group of blue-chip investors led by DigitalBridge, an asset manager, and has since merged with several data center operators. Over the years, DataBank has expanded aggressively, acquiring Indianapolis-based Lightbound in 2018 and purchasing zColo’s U.S. and U.K. data center assets in 2020. Today, DataBank manages more than 65 data centers across 27 markets and has raised $5 billion in the past 18 months alone.

Eion Hu, a partner at TJC, praised the investment, stating, “We could not be more excited to partner with Raul, DataBank, and the other world-class digital infrastructure investors supporting DataBank’s robust growth plans. Data centers are the cornerstone of digital transformation and artificial intelligence, and we believe DataBank is uniquely positioned to capitalize on the sustained demand for reliable, scalable, and energy-efficient infrastructure in an increasingly data-driven world.”

Neocloud Startups and AI Compute Demand

Beyond traditional data centers, a parallel surge is occurring in the "neocloud" sector, where startups are building cost-effective, AI-optimized cloud infrastructure. Companies like Crusoe Energy, CoreWeave, Lambda Labs, and Together AI are competing to provide scalable GPU-backed cloud computing solutions tailored for AI workloads.

CoreWeave, a GPU infrastructure provider with multiple Big Tech partnerships, has reached a valuation of $19 billion.

Lambda Labs secured a special-purpose financing vehicle of up to $500 million in April 2023.

Voltage Park, a nonprofit, announced in October 2023 that it is investing $500 million in GPU-powered data centers.

Together AI, a cloud GPU provider that also focuses on generative AI research, raised $106 million in March 2023, in a funding round led by Salesforce.

These companies are revolutionizing the data center landscape by offering flexible and cost-efficient computing power for AI applications. As generative AI models require immense processing capabilities, neocloud startups are gaining traction, providing a competitive alternative to traditional hyperscale cloud providers.

Future Projections and Environmental Considerations

A recent report by McKinsey predicts that capital expenditures on mechanical and electrical systems for data centers could exceed $250 billion within the next five years. This massive investment highlights the increasing reliance on AI-powered infrastructure and the need for efficient, high-performance computing resources.

However, the rapid expansion of data centers has raised concerns about environmental sustainability. Data centers are notorious for their high energy consumption and significant water usage for cooling. As AI-driven computing grows, industry leaders and policymakers are being urged to explore sustainable alternatives, such as liquid cooling technologies and renewable energy sources, to mitigate the environmental impact.

Despite these challenges, the data center market remains poised for exponential growth, driven by AI’s insatiable demand for computational power. With OpenAI, Microsoft, and other tech giants committing billions to expanding AI infrastructure, and companies like DataBank securing major investments, the industry is set to experience a transformative shift in the coming years.