Data centres: a powerful theme, but not without risk

Quay Global Investors

27 July 2026

Data centres sit at the heart of the AI theme and an extraordinary race is on to fuel the huge demand for ‘compute’. This article sets out how we think about the global data centre sector from an investment perspective: the demand and supply dynamics at work, development risks and why we believe price discipline matters more here than in almost any other part of the market right now. Our position is not that the theme is weak, it’s that good news is already in the price, and that an active, selective approach is the most reliable way to participate and manage the cross-section of risks.

Demand has surged, and most forecast it to continue

Spending by the largest cloud and AI providers has grown sharply since 2022 and continues at pace. The five largest companies in the space, or ‘hyperscalers’ – Amazon, Microsoft, Alphabet, Meta and Oracle – are expected to spend in the order of US$700 billion on capital projects in 2026, up around 70 per cent on 2025 and more than four times 2022 levels. Roughly three-quarters of this spend relates to data centres: self-builds, leasing from third-party operators, and sourcing servers and chips.

There has been genuine debate about how durable this appetite for capital expenditure will prove. Alphabet’s June 2026 equity raise of ~US$85 billion to fund AI infrastructure (the largest equity offering in history, in fact larger than the SpaceX IPO) suggests the major players remain fully committed, at least in the near term. That said, a commitment to spend is not the same as a return on that spend, and the eventual payback remains unproven.