The Week Ahead: 24 February - 02 March 2025
The Tech Capital
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Welcome to The Week Ahead! Your Forward-Focused Dispatch on Digital Infrastructure. Delivered every Monday, this newsletter breaks down the most significant finance and investment developments and trends in the world of digital infrastructure this week. Gain access to all our premium content, including news, features, videos, and podcasts, by registering for a The Tech Capital account here.
IN FOCUS
In this week's newsletter, we look at:
Dear Reader,
The US AI Diffusion Framework, introduced in the final days of the Biden administration, represents a significant shift in America's approach to artificial intelligence technology and its global distribution. Yet, we are still waiting on the Trump administration to speak on this.
The framework essentially aims to secure US leadership in AI while managing the strategic implications of its diffusion worldwide. Think of Startgate, but scaled to maintain US interests at heart.
The framework divides countries into three tiers, with varying levels of access to advanced AI chips and technology. Tier 1 includes the US and 18 allied nations, which face the fewest restrictions on AI chip imports. Tier 3 comprises China, Russia, and 23 other arms-embargoed nations, effectively banned from receiving advanced AI chips. Tier 2 encompasses all other countries, including strategic partners like India, Brazil, and Malaysia, which face restrictions but can receive limited AI chips under a new licensing framework.
This tiered system is designed to balance two competing interests: the commercial pressure to export US technologies widely and the need to control the proliferation of technology with critical national security implications. The framework aims to limit chip diversion to arms-embargoed countries, prevent the exfiltration and theft of AI model weights, and slow the development of frontier capabilities by US competitors.
However, the framework has faced criticism from various quarters. The European Union has expressed dissatisfaction with the exclusion of numerous member states from Tier 1, and companies like Nvidia and Oracle have described it as potentially destructive to the US technology industry. But can things change 2 months into the year? Critics argue that the rule may drive Tier 2 countries towards Chinese alternatives in the long term, despite the current lack of viable Chinese options for advanced AI chips.
Interestingly, and as mentioned, the Trump administration, which took office in January 2025, has not yet taken action on the AI Diffusion Framework. This inaction comes despite the administration's broader moves to reshape AI policy, including the rescission of Biden-era executive orders related to AI regulation.
According to exclusive data that The Tech Capital had access to from RBC Capital Markets, the framework's implications are far-reaching and easily split into six major takeaways:
Undoubtedly, the implementation and potential modification of the US AI Diffusion Framework will play a key role in shaping the future of AI development and deployment worldwide.
Elsewhere, and with just five weeks to go until our InfraAI Global Summit 2025, which will take place in the beautiful Athenian Riviera, significant progress has been made on our end, and more exciting announcements are due throughout this week. The conference is almost at capacity and will be selling out soon, so if you want to attend make sure to book soon.
On the Global Awards front, this is your last week to enter this year's accolades. The shortlist will be announced on March 12, with the winners to be unveiled at our International Finance Forum in London at a unique Awards Show on May 13 after the forum.
That's all for this week. Stay tuned for more updates and for now we invite you to join us across different social media platforms and also subscribe to our daily newsletter.
At The Tech Capital, You Lead. We Report.
Regards,
The Newsroom
THE BIG STORY
AI-nxiety Rising: Cloud Nine No More?
As the data centre market grapples with regulatory pressures and scrutiny over AI investments, industry leaders Equinix and Digital Realty adjust forecasts amidst the changing landscape. But are there alarm bells we need to consider or is this a natural chapter of a sector that is being forced to mature faster than expected?
Here's what happened:
The data centre market, while still exhibiting overall growth, is facing a complex landscape of challenges that are tempering expectations for the sector. With the first results season of 2025 in full swing, recent reports indicate that market outlooks have been slightly lowered due to a confluence of factors, including potential regulatory hurdles, increasing public scrutiny over energy consumption, limited available development sites in key markets, and concerns about rising construction costs.
Equinix (NASDAQ: EQIX), the world's largest data centre real estate investment trust (REIT) by market cap (US$88.74 billion), recently forecast first-quarter and annual revenue below estimates, citing the impact of a strong dollar and growing concerns about substantial spending on data centre expansion. The company expects first-quarter revenue to be between US$2.19 billion and US$2.23 billion, falling short of analysts' average estimate of US$2.29 billion. For the full year 2025, Equinix projects revenue between US$9.03 billion and US$9.13 billion, including a US$252 million negative foreign currency impact when compared to prior rates. This forecast also falls below analysts' expectations of US$9.40 billion.
Similarly, Digital Realty (NYSE: DLR), the second largest data centre REIT by market cap (US$54.85 billion), reported fourth-quarter earnings that surpassed analyst expectations. However, the company's shares experienced a decline following the announcement of softer-than-anticipated 2025 revenue guidance. Digital Realty forecasts full-year 2025 revenue in the range of US$5.8 billion to US$5.9 billion, which is below the Wall Street consensus estimate of US$6.13 billion. The company also introduced 2025 constant-currency Core Funds from Operations (FFO) per share guidance of US$7.05 to US$7.15.
These financial projections come at a time when the data centre industry is facing increased scrutiny over its energy consumption and environmental impact. Moody's, the credit rating agency, has alerted that data centre projects are likely to face resistance in some markets, with regulatory actions potentially constraining both demand and supply. Public concerns about data centres' substantial electricity requirements are expected to become more prominent, even as state and regional governments continue to offer tax incentives to attract new facilities.
The industry is also grappling with the implications of massive spending on artificial intelligence (AI) and infrastructure investments. The launch of China's DeepSeek, which claimed to have developed AI models at a fraction of the cost compared to U.S. tech leaders OpenAI and Alphabet's Google, has intensified scrutiny of AI-related expenditures. This has led to questions about the efficiency and necessity of large-scale investments in AI infrastructure, potentially impacting data centre demand.
Despite these challenges, the data centre market continues to show resilience. Equinix reported that two-thirds of its recurring revenues come from customers who deploy in more than 10 International Business Exchange (IBX) data centres. To meet this demand, the company is expanding its global footprint with 62 major projects underway across 36 markets in 25 countries. These projects include 16 xScale facilities, which are expected to add approximately 34,000 cabinets of retail capacity and over 165 megawatts of capacity by the end of 2026.
Furthermore, Equinix announced plans to nearly triple the capital invested in its xScale data centre portfolio through a joint venture with Canada Pension Plan Investment Board (CPP Investments) and GIC, valued at over US$15 billion. The initiative aims to construct new xScale facilities across the United States, each with multi-hundred megawatt capacity, to support larger AI and hyperscale workloads.
Here's our take:
The current state of the data centre market reflects a sector that is rapidly maturing and attracting the world's eyes beyond its usual community. While the slight downturn in financial forecasts from industry leaders like Equinix and Digital Realty may raise concerns, it is important to view these developments within the broader context of the market's evolution.
The scrutiny over AI spending and the emergence of potentially more cost-effective AI development models, as demonstrated by China's DeepSeek - although we do not yet know all the details from Beijing -, could lead to a recalibration of investment strategies in the data centre space. However, this should not be interpreted as a fundamental weakness in the sector. Rather, it represents a maturation phase where efficiency and sustainability are becoming as crucial as raw capacity expansion.
The increasing public and regulatory focus on data centres' energy consumption is a double-edged sword. On one hand, it poses challenges in terms of site selection and operational costs. On the other, it is driving innovation in energy-efficient technologies and sustainable data centre designs. Companies that can adapt to these pressures and lead in sustainable practices are likely to gain a competitive edge in the long term.
The continued expansion plans of players like Equinix and Digital Realty, despite short-term headwinds, indicate a strong underlying confidence in the sector's growth trajectory. And the same goes for nearly all operators out there. The shift towards more diversified and flexible data centre solutions, such as Equinix's transformation from a wholesale provider to a more diversified colocation business, demonstrates the need to em embrace adaptability to changing market demands.
Moreover, the historic-low vacancy rates for data centre capacity across several markets suggest that demand continues to outstrip supply, even in the face of these challenges.
Ultimately, the fundamental drivers of growth remain strong.
LONG READS
While hyperscalers are funding and constructing the majority of the newest and largest subsea cable infrastructure, Subsea Networks EMEA 2025 (hosted in London on 18-19 February) highlighted that, at least in Europe, there is still significant space for private companies, research institutions, and telecom carriers to participate. Read more here
Industry titans gather to dissect the burgeoning relationship between fibre infrastructure, AI, and cloud computing, forecasting a US$5-6 trillion investment surge in the coming years. Read more here
The Tech Capital presents a comprehensive history of Crown Castle’s Fibre business, exploring its investment thesis, underperformance and why it is being sold. Read more here
QUOTE OF THE WEEK
WEEK IN PREVIEW
TTC CONFERENCES
The Tech Capital Global Awards 2025 presents a compelling opportunity for professionals and organisations in the digital infrastructure sector.
The Tech Capital Global Awards 2025 covers a wide range of categories, ensuring that various aspects of digital infrastructure finance and development are recognised. From deal-making to sustainability initiatives, the awards programme offers multiple avenues for showcasing your organisation’s strengths and achievements.
To participate, ensure that your submission adheres to the 900-word limit and includes any relevant supporting materials. The awards are free to enter, although attendance at the Awards Show & Dinner requires the purchase of a ticket.
Consider submitting your entry before the 14 February deadline to position your organisation at the forefront of digital infrastructure innovation and excellence.
For more information, visit here.
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INDUSTRY CALENDAR
Digital Garden Tokyo - 17-18 Mar 2025 LEARN MORE
The Tech Capital International Finance Forum & Global Awards London- 12-13 May 2025 LEARN MORE
InfraAI Summit'25, by The Tech Capital Athens Riviera - 26-27 March 2025 LEARN MORE
The Tech Capital LATAM Finance Forum São Paulo - 03 July 2025 LEARN MORE
The Tech Capital APAC Finance Forum Singapore - 25 September 2025 LEARN MORE
infra/STRUCTURE Summit Las Vegas - 15-16 October 2025 LEARN MORE
The Tech Capital Middle East & Africa Finance Forum Abu Dhabi - 03 December 2025 LEARN MORE
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