Market sell-off, rising rates test AI data centre deal boom
Pulled listings signal tougher funding conditions; investors question valuations as borrowing costs rise
[HONG KONG] A market sell-off is forcing companies driving the global artificial intelligence boom to delay fundraising plans or pay more for capital as investors demand proof that they can absorb rising interest rates and computing-power costs.
The shift comes as investors reassess whether the companies racing to build the infrastructure underpinning AI can generate returns that justify soaring spending on computing power, land and energy.
In the past week alone, as AI-related stocks have weakened and the debt of data-centre operator CoreWeave has slumped towards distressed prices, listings for a Blackstone-backed AirTrunk Reit, Nvidia-backed Firmus and SoftBank-backed SB Energy have either been pulled or paused.
The increased scrutiny is not derailing investment in the sector, analysts said, but it is forcing investors to distinguish more sharply between business models and levels of execution risk.
“The conversation has shifted from growth at any cost to a much sharper focus on quality,” said Harry Evans, a partner at law firm Freshfields.
He added that deal activity could hold up through next year, thanks to a strong pipeline.
Recent listing setbacks, however, show investors are becoming more discerning about valuations, leverage and business models.
Mergers and acquisitions involving Asian data centres is still on track for a record year, reaching US$21.3 billion on Tuesday (Oct 13), Dealogic data showed. This is more than double the US$10 billion recorded in all of 2025.
Debt financing has also remained strong, with syndicated loans and bond issuance totalling US$22.3 billion so far this year.
Equity capital market fundraising for the sector, however, is down, at US$5.4 billion so far this year, a 4.6 per cent drop from the same period in 2025.
“General thoughts with IPOs (initial public offerings) are that they often seek ‘hype’, as they’re largely looking for oversubscription,” said Nicholas Tuan, director of Asia-Pacific advisory services at real estate services firm Savills.
“There may not be fundamental asset value when you peel it all back.”
Firmus, which had aimed to raise US$5 billion in what would have been Australia’s second-largest stock market listing, struggled to convince investors that it could deliver on ambitious revenue projections while carrying about US$30 billion of debt.
Nuclear services company Holtec cited a “perfect storm”, driven mainly by uncertainty around data-centre demand, when it pulled its US listing last month.
Higher rates test valuations
Higher borrowing costs are at the heart of the new scrutiny.
Benchmark 10-year US Treasury yields posted their sharpest quarterly rise this century in September, prompting investors to take a closer look at whether projected revenues can support growing debt burdens, bankers said.
Gary Goh, CEO of Sprint DC Consulting, an Asia-Pacific data centre consultancy firm based in Kuala Lumpur, warned that higher financing costs could lead to sharp valuation corrections.
Valuations can vary widely depending on whether they are based on existing customer contracts or future projections, and whether capital expenditure requirements are fully reflected, said a banker who advises data centre investors.
“There is not remotely enough data centres built for the demand,” said the banker, who was not authorised to speak publicly. “Investors are still going in but the question is at what valuation.”
Investors are also paying closer attention to execution risks.
Beyond higher power and water costs, developers face growing opposition in some markets over electricity use, noise and environmental concerns, adding to regulatory uncertainty around new projects.
Securing suitable land and power supplies is becoming more difficult in some jurisdictions, said a person at a US-based firm that invests in Asian data centre platforms, adding that the company had tightened its underwriting criteria because of geopolitical and policy risks.
To be sure, major transactions are still moving ahead.
Singapore-based DayOne is expected to go public as soon as November, seeking to raise up to US$5 billion, Reuters reported in September. DayOne did not immediately respond to a request for comment.
AirTrunk, despite postponing a planned real estate investment trust listing, is nearing a deal to sell its Johor data centre in Malaysia to a group of investors including local pension fund Kwap at a valuation of about US$1 billion, according to two people familiar with the matter.
Bain Capital has also received final bids for at least 40 per cent of its pan-Asian platform Bridge Data Centres in a deal that could value the business at around US$5 billion, two sources said.
AirTrunk’s backer Blackstone and Bain Capital declined to comment. Kwap said it was not in a position to comment.
Still, investors are likely to differentiate between established wholesale operators with long-term customer commitments and stable revenue, and higher-risk “neoclouds” and “AI-campus builders”, said John Dinsdale, chief analyst at TechInsights.
“The question for investors is less whether demand will expand than which business models and companies will be best placed to capture that growth sustainably.” REUTERS
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