PitchBook News - Chokepoints in the AI boom

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The Weekend Pitch

December 22, 2024

The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data

(Chloe Ladwig/PitchBook News)

In 2024, investors placed feverish bets on data center development, with digital infrastructure GPs deploying a record $39.6 billion in PE deals for data center and related assets—12 times the sum spent in 2016.

While bullish sentiment naturally follows surging digitalization efforts and the race among tech companies to win dominance in AI, the frenzy may belie some of the chokepoints in this market, including limits on power and land, consultants, analysts and digital infrastructure investors tell me.

I'm Madeline Shi, and this is The Weekend Pitch. You can reach me at madeline.shi@pitchbook.com or on X @Madelin94615831.

To start, data centers need massive amounts of electricity to support their round-the-clock operations and to maintain a stable ecosystem for servers, network equipment and other gear. The facilities designed to train and run AI models have a more voracious demand for power than those supporting traditional cloud software providers—the largest can require more than 100MW of power, or enough to power tens of thousands of homes.

To satisfy AI's hunger for power, the industry must rapidly expand its access to energy resources. By 2030, data centers could consume up to 12% of total US power, whereas they account for 3% to 4% of total US power demand today, McKinsey & Company noted in a September report.

Trivia

Databricks has set the record for 2024's largest fundraise, netting $8.6 billion for its ongoing Series J. Which startup did Databricks nab the crown from for this year's largest VC round?

A) Stripe
B) Coreweave
C) OpenAI
D) xAI

Find your answer at the bottom of The Weekend Pitch!

2025 is looking like
a brighter year for VC

(Fokusiert/Getty Images)

Our venture analysts are feeling optimistic about 2025.

The state of the VC industry has been pretty dreary lately. Late-stage deals are few and far between, and tech IPOs are even scarcer. But the temporary pain could pave the way for a strong 2025, according to our 2025 US Venture Capital Outlook.

Interest rate cuts could jump-start some long-delayed public listings. Valuations are poised for a rebound. And we could see more acquisitions as investors face the acute pressure of liquidity generation. All in all, it's shaping up to be a good year.

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Critical signals for allocators
as 2025 rolls in

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The economic crystal ball remains cloudy, with an array of scenarios—higher for longer, soft landing or recession—hanging in the balance. Our latest Allocator Solutions report covers the potential macro regimes shaping outcomes for PE, VC, private credit and real estate in 2025.

We unpack the critical signals for allocators, including stretched valuations in buyouts, a more favorable dealmaking environment for VC, the evolving landscape of private credit and a rebound in property fundamentals in real estate.

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Quote/Unquote

(Andrew Harnik/Getty Images)

"My confidence level of the economy of the United States has tremendously increased with his victory,"

—SoftBank CEO Masayoshi Son, announcing alongside President-elect Donald Trump that $100 billion will be invested into US companies. Read more about what that could mean for the venture landscape here.

Stay tuned

Keep an eye out for these insights and research reports coming out this week:

Q3 2024 E-commerce Report
2024 Industrial Tech Outlook
Q3 2024 Emerging Tech Indicator Report
Analyst Note: H2 2024 Tech and Fundraising Survey

Trivia

Answer: C

Databricks surpassed OpenAI's $6.6 billion with its $8.6 billion Series J for 2024's largest VC fundraise. The deal is also one of the largest ever. You can read more about the Databricks deal here.

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This edition of The Weekend Pitch was written by Madeline Shi and Jacob Robbins. It was edited by Heather West and Ron Prichard.

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PitchBook News - Chokepoints in the AI boom

Trivia

2025 is looking like
a brighter year for VC

Critical signals for allocators
as 2025 rolls in

Quote/Unquote

Stay tuned

Trivia

Sign up for our newsletter

Older messages

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PitchBook News - Chokepoints in the AI boom

Trivia

2025 is looking like a brighter year for VC

Critical signals for allocators as 2025 rolls in

Quote/Unquote

Stay tuned

Trivia

Sign up for our newsletter

Older messages

You Might Also Like

2025 is looking like
a brighter year for VC

Critical signals for allocators
as 2025 rolls in