Switch, a data centre operator with facilities in Nevada, Michigan, Atlanta and Texas, is in talks to raise billions of dollars at a valuation above $50bn. The company is negotiating with private equity firms including KKR and Brookfield.
Switch was founded in 2000, went public in 2017, was taken private in 2022 at a valuation of $11bn including debt, and is now seeking a valuation roughly five times higher. An IPO as soon as next year is reportedly under consideration.
AI did that.
Demand case
Data centre capacity is constrained. Hyperscalers are spending hundreds of billions on infrastructure and still cannot build fast enough. Companies that own existing facilities with power connections and cooling infrastructure are sitting on assets that have appreciated faster than almost any other category in commercial real estate.
Switch has five locations and a track record of operating at scale. The company has already raised significant capital through debt issuance and is now looking to raise equity to fund further expansion.
The logic is straightforward: build more capacity while demand exceeds supply and lock in long-term contracts with creditworthy customers.
Overcapacity risk
The data centre industry has been here before. The dot-com era produced a wave of speculative building that left operators with empty facilities and crushing debt when demand stalled.
The current cycle is different in scale and in the quality of the customers, but the underlying risk is the same. Long-term contracts provide revenue visibility, but they do not eliminate the possibility that customers renegotiate or walk away if demand shifts.
If AI capex spending slows, or if the hyperscalers build enough internal capacity to reduce their reliance on third-party operators, the companies that raised capital at peak valuations will be the most exposed.
Valuation question
A $50bn valuation for a company that was worth $11bn three years ago requires a belief that AI-driven demand is structural, not cyclical. That belief is widely held today. Whether it will be widely held in 2028, when the contracts signed now begin to mature and the next wave of capacity comes online, is the question investors should be asking before they write the cheque.
Switch is a real company with real assets. The valuation it is seeking reflects a market that has decided data centres are the new gold mines. History suggests that when everyone agrees an asset class can only go up, the timeline for the correction has already started.
