Investing in data centers: high returns with high risk
The data investor's ‘kitchen’
The most important question for any investment is: ‘When will the money invested be returned?’ In the best-case scenario, data centre investors have to wait five to seven years. Connecting to the power grid takes up to three years, and construction itself takes another year and a half to two years. In such a short time frame, even a minor setback — power outages, cyberattacks or delays in the supply chain — can dash all of an investor's expectations. An hour of downtime can cost millions of dollars in losses.
By 2030, electricity demand is expected to double, requiring an additional 945 terawatt-hours of capacity — roughly what Japan consumes today! And while wholesale rental rates in data centres have risen by more than 50% since 2021, the risks are also increasing. In an attempt to transfer as many management functions as possible to AI, a new problem has already emerged — its algorithms are becoming another point of entry for attackers. In the event of damage, the same AI that optimises performance can easily disable it.
The most important question for any investment is: ‘When will the money invested be returned?’ In the best-case scenario, data centre investors have to wait five to seven years. Connecting to the power grid takes up to three years, and construction itself takes another year and a half to two years. In such a short time frame, even a minor setback — power outages, cyberattacks or delays in the supply chain — can dash all of an investor's expectations. An hour of downtime can cost millions of dollars in losses.
By 2030, electricity demand is expected to double, requiring an additional 945 terawatt-hours of capacity — roughly what Japan consumes today! And while wholesale rental rates in data centres have risen by more than 50% since 2021, the risks are also increasing. In an attempt to transfer as many management functions as possible to AI, a new problem has already emerged — its algorithms are becoming another point of entry for attackers. In the event of damage, the same AI that optimises performance can easily disable it.
Cybersecurity as a new form of reliability
A complex surgical operation is halted due to the loss of real-time images. Trading operations on the stock exchange are temporarily frozen, and critical communications at military facilities suddenly shut down. All of this can happen as a result of equipment overheating due to a cyberattack, which can instantly cause a failure by violating security protocols, shutting down generators, or changing cooler settings.
And while the reliability of a data centre used to be measured by the number of backup generators and cooling systems, cyber resilience is now becoming a key factor. 99.9995% uptime and protection of digital systems.
A complex surgical operation is halted due to the loss of real-time images. Trading operations on the stock exchange are temporarily frozen, and critical communications at military facilities suddenly shut down. All of this can happen as a result of equipment overheating due to a cyberattack, which can instantly cause a failure by violating security protocols, shutting down generators, or changing cooler settings.
And while the reliability of a data centre used to be measured by the number of backup generators and cooling systems, cyber resilience is now becoming a key factor. 99.9995% uptime and protection of digital systems.
The world is experiencing another investment boom. And, of course, the reason is artificial intelligence, or more precisely, the growing demand for AI computing power and digital transformation. What risks and threats should you be aware of when investing in the development or construction of another data centre? Unlike traditional real estate, this is not just a simple ‘box’ with servers where data is stored and processed, but a complex operational structure that requires thorough protection against cyberattacks and hacks.
At LLC "EIFOS HUB", we tried to figure this out and describe the problem as simply as possible, avoiding unnecessary IT terms that were sometimes new to us.
At LLC "EIFOS HUB", we tried to figure this out and describe the problem as simply as possible, avoiding unnecessary IT terms that were sometimes new to us.
The blind spot in cybersecurity
In a world where data centres support critical infrastructure, the most insidious threats are those that cause remote damage by exploiting power, temperature and access control systems. The worst-case scenarios have already become reality: Stuxnet in Iran, the attack on Ukraine's power grid, and the Triton malware in Saudi Arabia. So far, data centres have avoided high-profile incidents, but the risk remains — overheating or power surges can destroy AI clusters worth hundreds of millions.
With the growing use of AI to control the facilities themselves, a new vector of attack is emerging: a compromised algorithm can disable protection or distort control.
What investors need to know
We would like to reiterate that investing in a data centre is not the same as investing in real estate. Furthermore, a Tier 4 certificate is not sufficient proof of a data centre's reliability. It is a prerequisite, but not enough on its own.
Investors who are offered to participate in a construction project or invest in a finished facility should ask the right questions and expect specific answers:
Conclusion
Investments in data centres promise high returns. Investors can choose between shares in leading operators (Equinix, Digital Realty), real estate investment trusts (REITs) and exchange-traded funds (ETFs, such as SRVR or VPN). Access to these instruments is provided by international brokers such as Interactive Brokers, Saxo Bank, or DEGIRO. But, as in any business, you need to be aware of the pitfalls. And there are quite a few of them here. LLC "EIFOS HUB" analyses data centre segments and assesses investment risks and infrastructure threats.
LLC "EIFOS HUB" helps investors build a strategy by assessing the cyber and operational risks of specific operators and selecting the most suitable stocks, funds (REIT, ETF) or a combination thereof for a specific investor portfolio.
In a world where data centres support critical infrastructure, the most insidious threats are those that cause remote damage by exploiting power, temperature and access control systems. The worst-case scenarios have already become reality: Stuxnet in Iran, the attack on Ukraine's power grid, and the Triton malware in Saudi Arabia. So far, data centres have avoided high-profile incidents, but the risk remains — overheating or power surges can destroy AI clusters worth hundreds of millions.
With the growing use of AI to control the facilities themselves, a new vector of attack is emerging: a compromised algorithm can disable protection or distort control.
What investors need to know
We would like to reiterate that investing in a data centre is not the same as investing in real estate. Furthermore, a Tier 4 certificate is not sufficient proof of a data centre's reliability. It is a prerequisite, but not enough on its own.
Investors who are offered to participate in a construction project or invest in a finished facility should ask the right questions and expect specific answers:
- How often is cyber resilience assessed? Who conducts them? Are they different assessors? How independent are they?
- Are the operating systems physically (‘air-gapped’) and digitally isolated from the internet? This will make remote hacking much more difficult.
- What is the cyberattack response plan and how quickly can the centre restore operations?
- How is AI managed and what barriers prevent attackers from using it against the infrastructure to disable the facility?
Conclusion
Investments in data centres promise high returns. Investors can choose between shares in leading operators (Equinix, Digital Realty), real estate investment trusts (REITs) and exchange-traded funds (ETFs, such as SRVR or VPN). Access to these instruments is provided by international brokers such as Interactive Brokers, Saxo Bank, or DEGIRO. But, as in any business, you need to be aware of the pitfalls. And there are quite a few of them here. LLC "EIFOS HUB" analyses data centre segments and assesses investment risks and infrastructure threats.
LLC "EIFOS HUB" helps investors build a strategy by assessing the cyber and operational risks of specific operators and selecting the most suitable stocks, funds (REIT, ETF) or a combination thereof for a specific investor portfolio.
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