Blog 6: Week 3

 Since I last wrote, my role as an intern at MAI has expanded drastically. I have gone from largely shadowing and meeting with different employees to learn about their respective jobs to doing real work for both my mentor and the company.

One role I have been able to fill is that of conducting actionable research. My mentor mentioned that he has been hearing the term and concept of data centers thrown around a lot lately and they seem to be an investment theme trending upwards with room to grow. To verify this assertion, offer some more clarity on why exactly they make an attractive investment, and ways in which to gain exposure, he had me conduct a research report.

To begin this report, I started with the question of what exactly a data center is. Through some digging, I found that a data center is essentially a large warehouse full of computers that house data and processing for companies and firms around the globe. There are 3 main types of these software giants: hyperscalar, colocation and micro. Hyperscaler data centers refer to centers owned solely by extremely large tech companies like Google or Amazon that house tons and tons of data. Colocation data centers refer to spaces in which companies can rent space within the data grid, almost like a tenant of the center, this allows multiple companies to share one location. Finally, micro data centers are found usually in a single office room within a building, housing the data and computing for smaller companies on site.

Then, to grasp what makes these such a buzz word and possible noteworthy investment, I dug into the numbers. In the next 10 years, the demand for data centers is expected to triple, due largely to the emergence of ai, a system run heavily on data centers. This will require the construction of tons of new data centers, which is why, in short, many view them as attractive investments. 

However, the cat is out of the bag on this phenomena so to speak, so all of the "smart money" already has capital committed towards to the building of new data centers, leaving very little room for more gains. This poses the question: how can investors still make money off of data centers in the coming years.

To do so, I proposed that investors look to the enablers. The enablers refers largely to the power required to run these massive power-devouring warehouses. Nationwide, as a result of the surge in demand for data centers, power usage is expected to rise by 23%, a quote substantial number that could make an investment in power companies quite lucrative. However, peeling back the onion even one layer further, I believe the real money is to be made in those that supply the power companies with their power, in this case, renewable energy. 

The need for more power coupled with concerns surrounding climate change and greenhouse gas emissions has laid the foundation for renewable energy sources like wind and solar to shoulder the majority of the load that data centers will demand. Investing in the manufacturers of the products that harness this energh could result in extremely attractive gains as I predict their sales to increase significantly as the demand for their products skyrockets. 

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