Blackstone's Jon Gray on QTS Takeover: Fueling the AI Revolution with Data Centers

Blackstone’s Jon Gray on QTS Takeover: Fueling the AI Revolution with Data Centers

Private equity titan Blackstone is constructing a massive $25 billion data center empire in Arizona, in what marks one of their largest investments ever. The linchpin is their $10 billion takeover of data center operator QTS last year. This strategic bet aims to meet the computing needs of major tech firms amid the AI boom.

Following their tried and tested approach, Blackstone spotted surging demand for digital infrastructure that current supply couldn’t meet. So they invested billions to build giant facilities that can provide the essential computing power tech giants need.

Through this deal, QTS has become the top provider of leased data center capacity in North America. For tech behemoths like Meta and Microsoft that may rely on QTS for space and electricity to power AI processes, QTS is a potential goldmine.

But expanding further faces challenges, as these projects require enormous resources. QTS expects its new data centers to consume a massive six gigawatts of electricity – enough for around 5 million homes!

There’s also the problem of power shortages in key areas. Some sites may require new power lines, raising costs for others on the grid. QTS has struggled to get approval for mega projects, as seen in their clash over an 850-hectare data center corridor in Virginia.

This conflict highlights the inevitable tensions from the AI industry’s rapid data center expansion, often driven by disruptive private equity forces.

Still, with advanced AI needing powerful infrastructure, Blackstone believes those with land and capital hold a big advantage, says company president Jon Gray.

“QTS is a lens into a crucial, high-momentum part of the economy. AI will be a powerful force for good,” Gray said.

Looking ahead, Blackstone and QTS are exploring bold moves, including acquiring a rival. The data center journey continues, now with legal battles and community backlash part of the mix.