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Data Center in Brazil Follow the Money Report

Opportunities for Change

The Brazilian data center market is undergoing a significant transformation driven by substantial investments and strategic M&A activities. These movements are creating numerous opportunities for change across the entire value chain, primarily focused on expanding capacity, modernizing infrastructure to support new technologies like Artificial Intelligence (AI), and consolidating market players.

1. Expansion and Modernization of Physical Infrastructure: - Hyperscale Development: Significant investments are flowing into the construction of new, large-scale hyperscale data centers. Players like Ascenty (Brookfield/Digital Realty JV) and CloudHQ are actively expanding their footprints with multi-megawatt facilities in key hubs like São Paulo and Rio de Janeiro. This addresses the growing demand from cloud service providers and large enterprises. - AI-Specific Infrastructure: A major driver of investment is the need to support AI workloads. Scala Data Centers' R$ 3 billion funding for AI infrastructure development and their planned "Scala AI City" exemplify this trend. This creates opportunities in designing and building facilities with high power density, advanced cooling solutions (including liquid cooling), and specialized hardware configurations. - Geographic Diversification: Companies like Elea Data Centers are investing to expand sustainable digital infrastructure beyond the traditional São Paulo-Rio de Janeiro axis, opening opportunities in other major Brazilian cities and addressing regional demands.

2. Technological Upgrades and Specialization: - Advanced Cooling Solutions: The surge in AI and high-performance computing (HPC) necessitates a shift towards more sophisticated cooling technologies. This creates opportunities for suppliers and implementers of liquid cooling and other advanced thermal management systems. - High-Performance Hardware Procurement: Increased demand for specialized hardware, including GPUs, high-density servers, and robust networking equipment, is a direct result of the AI boom and general capacity expansion. This benefits technology and equipment suppliers. - Enhanced Connectivity: The growth of data centers fuels the need for increased internet transit capacity, diverse fiber routes, and efficient interconnection. Opportunities exist for network service providers to expand their offerings and build out more robust connectivity ecosystems.

3. Service Evolution and New Commercial Models: - Specialized Colocation and Managed Services: The rise of AI and HPC is creating demand for specialized colocation services tailored to these workloads. There are also growing opportunities for managed services related to AI infrastructure management, optimization, and security. - New Investment and Operational Models: Joint ventures like the GIC and Alianza partnership (R$ 2 billion investment) are popularizing models such as sale-and-leaseback and built-to-suit contracts, particularly for hyperscale operators. This signals a shift in how data center assets are financed and operated. - Consolidation and Enhanced Service Portfolios: M&A activities are leading to the consolidation of colocation, cloud, and managed service providers. This creates opportunities for merged entities to offer broader service portfolios, greater geographic reach, and achieve economies of scale, potentially leading to more competitive offerings for customers.

4. Development of Specialized Skills and Support Services: - Specialized Workforce: The increasing complexity of data center facilities, especially those supporting AI, requires a workforce with specialized skills in managing high-density environments, advanced cooling, and AI infrastructure. This creates opportunities for training and talent development. - Ancillary and Support Services: Growth in the sector drives demand for a wide range of support services, including due diligence for M&A, specialized construction management, migration services, compliance (LGPD), advanced security solutions, and maintenance. The AI boom specifically increases demand for consulting and professional services focused on implementing and optimizing AI infrastructure.

5. Focus on Sustainability and Efficiency: - Energy Efficiency: With the increased power demands of new facilities, particularly for AI, there is a heightened focus on energy efficiency (PUE) and sustainable power sources. This creates opportunities for solutions and technologies that improve energy management and reduce environmental impact. Elea Data Centers' focus on sustainable digital infrastructure highlights this trend.

Government and Financial Support: - The Brazilian Development Bank (BNDES) launching a R$ 2 billion credit line for data center investments and the government's Artificial Intelligence Plan 2024-2028 (R$ 23.03 billion for AI infrastructure) signal strong public sector support. This financial backing further de-risks investments and encourages growth in these opportunity areas.

In summary, investments are primarily targeting the Construction & Infrastructure Deployment and Data Center Services (Colocation, Cloud, Managed) stages of the value chain, with a strong emphasis on preparing for the demands of AI. This focus, however, has a cascading effect, creating opportunities for innovation, specialization, and service enhancement across all segments of the Brazilian data center value chain, from planning and design to ancillary support services.

Key Findings

Opportunity Area Key Drivers Examples of Investment/Activity Impacted Value Chain Steps
Hyperscale Data Center Expansion Growing cloud adoption, enterprise demand Ascenty's ongoing constructions, CloudHQ's new projects (Rio, São Paulo) Planning & Design, Construction & Infrastructure Deployment, Technology & Equipment Supply, Data Center Operations & Management, Connectivity & Network Services, Data Center Services
AI-Focused Infrastructure Development Rise of AI/ML workloads, demand for high-power computing Scala Data Centers' R$ 3B funding for AI, "Scala AI City" project, Government's AI Plan Planning & Design, Construction & Infrastructure Deployment, Technology & Equipment Supply (GPUs, advanced cooling), Data Center Operations & Management, Data Center Services (specialized AI colocation)
Geographic Diversification of Data Centers Need for edge computing, regional demand, reducing latency Elea Data Centers' R$ 5B investment plan beyond São Paulo-Rio axis Planning & Design, Construction & Infrastructure Deployment, Connectivity & Network Services, Data Center Services
Market Consolidation through M&A Pursuit of scale, efficiency, broader service offerings, market share Global trend reflected in Brazil; increased interest from investment funds and colocation providers All value chain steps, particularly Data Center Services (Colocation, Cloud, Managed), Investment & Ownership
Adoption of Advanced Technologies AI workload requirements, operational efficiency Investment in liquid cooling, high-density power solutions Planning & Design, Construction & Infrastructure Deployment, Technology & Equipment Supply, Data Center Operations & Management
New Investment & Commercial Models Capital for large projects, flexibility for hyperscalers GIC & Alianza JV (R$ 2B) for sale-leaseback and built-to-suit models Investment & Ownership, Data Center Services
Development of Specialized Services Complexity of new infrastructure, AI-specific needs Growing demand for AI infrastructure management, specialized cybersecurity, migration services for consolidated/new facilities Data Center Services (Managed), Ancillary & Support Services
Government & Financial Institution Support Strategic national importance, fostering sector growth BNDES R$ 2B credit line for data centers, Brazilian Artificial Intelligence Plan Construction & Infrastructure Deployment, Technology & Equipment Supply, Investment & Ownership
Increased Focus on Sustainability Higher energy consumption, corporate responsibility, regulatory pressures Elea Data Centers' emphasis on sustainable infrastructure, general market trend towards better PUE and renewable energy integration Planning & Design, Construction & Infrastructure Deployment, Data Center Operations & Management

References

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  • A Piemonte.