Getting in on the Ground Floor Without Getting Crushed
Two truths can hold at once: (1) This is a generational compute shift that will require tremendous infrastructure investment; (2) We’re still in the early stages in separating the signal from the noise. We are true believers in the potential of AI and committed to investing in AI infrastructure across data centers, power, and connectivity. But we also see a need for strict discipline. A few tenets we live by when it comes to structuring data center investments include:
Those who control the moats should reap the compounding returns. Power, land, grid connections, and permits are structural bottlenecks to building data centers. Customer relationships and operational expertise are less tangible obstacles developers and managers must clear to work with the lowest-risk counterparties, investment-grade hyperscalers. We think it will be difficult for business models that rely on renting GPUs or power to achieve sustainable differentiated returns. Those who own the tangible resources and master the intangible ones are in a better position to win.
Unit economics are more important than hype. The prices of land and power are rising, especially in key data center markets. We care about return on invested capital after power and capital costs, not theoretical total addressable markets. The important question is whether contracted returns hold once utilization, cost of capital, and operating leverage normalize in the current cycle.
Execution matters. In addition to controlling scarce inputs, we think the ability to build what you promise will be a key long-term differentiator. Those who can quickly deliver a fully executed lease or development agreement, achieve reasonable costs per delivered megawatt, keep built data centers operational and available (uptime), and renew leases at profitable rates will be at an advantage.
De-risking is critical. Positioning for AI fatigue must happen before its arrival. That means securing contracts with long-term offtake agreements – meaning that data center tenants pay whether they use the facility to full capacity or not – balancing counterparty exposure, and building with flexibility in mind, so that we can pivot as technology and demand evolve.
Exits and Valuation Dynamics
The same factors that help de-risk our investments also set the stage for more favorable exits. Stabilized, fully operating data centers attract core and core-plus infrastructure funds, sovereigns, and listed platforms seeking long-duration, investment-grade cash flows. Portfolio buyers are typically willing to pay a premium for platforms with secured power access, entitled land, and expansion capacity.
Investors usually value data centers either by income yield or by enterprise value per delivered megawatt (MW), then adjust based on contract strength, expansion potential, and power certainty. Exhibit 7 illustrates a simplified unit-economics model based on income yield.
Valuations rise for platforms that combine:
- Access to scarce power and land in super-core markets — for example, Slough in London, Singapore, or Northern Virginia, where demand density and network proximity make expansion capacity uniquely valuable
- Long-term, take-or-pay contracts that require the tenant to pay for a certain level of usage, whether or not they actually use the full capacity of the site, with operations and maintenance cost pass-throughs
- Titled land and expansion permits
- Robust interconnects (high-speed fiber and network switching)
- Proven uptime and cost discipline
- Designs supporting higher power densities
Conversely, assets that lack fungibility—those built to bespoke specifications, located in non-core or peripheral areas, or situated far from major population and network centers—carry higher residual and re-use risk. Facilities with limited alternative uses or uncertain long-term relevance should be valued differently from scalable, well-located platforms with durable demand anchors. Similarly, exposure to single-tenant concentration, short-term leases, uncertain power rights, leased land, or thin margins after energy and capital costs can further weaken sale prospects and valuation multiples.
The KKR Global Infrastructure team has been investing in data centers since 2019, building one of the most active and globally diversified portfolios in the sector. We’ve now established five major data center platforms spanning hyperscale, colocation, and edge infrastructure.
Over the past six years, we’ve committed $31.3 billion in equity capital to digital infrastructure investments, reflecting our conviction in the theme.
We take a disciplined, conviction-led approach. Every assumption is challenged, with teams debating bull and bear cases and pressure-testing logic from all sides. We set clear exit or stop-loss criteria upfront and quickly shut down what doesn’t compound—freeing capital and focus for the “yes” opportunities that matter.
We also recognize that the center of gravity is shifting. AI workloads now sit at the intersection of digital, power, renewables, and industrials. We think our “One KKR” model—sharing insights, aligning customer relationships, and coordinating capital across verticals—sets us apart in a world where data, energy, and compute are rapidly converging, and where silos can kill even the best ideas.
EXHIBIT 7: An Illustrated Guide to Data Center Unit Economics
