Data centers have become a new favorite in commercial real estate. Newmark has estimated that the industry would double in size by 2030 to accommodate artificial intelligence applications.
However, the entry of Chinese AI startup DeepSeek has raised questions about the U.S. AI industry and the future of data centers.
The hype and money around generative AI are formidable. The revolution has taken markets quickly with companies and entire industries trying to outpace one another in using the technologies. OpenAI, creator of ChatGPT, had a reported post-investment valuation of $157 billion last fall. Last week, CNBC reported that the company was in talks for roughly $40 billion in new investment at a $340 billion valuation.
The type of software is compute-intensive and requires extensive data centers. Investment flows into this sector have been robust as firms scramble to take advantage of the fundamentals. Harrison Street raised $600 million to invest in the North American data center market. EDGNEX Data Centers by DAMAC is set to enter the U.S. data center market with more than $20 billion for an initial investment. The BlackChamber Group is putting more than $1.2 billion into four Northern Virginia data center campuses.
Also, the global data center capacity will ‘surge again in 2025,’ said a January global outlook from Moody’s Ratings. Apollo Global Management expects that demand for data centers and the necessary infrastructure will require $2 trillion in investment by 2030.
Then suddenly came DeepSeek, which not only undercharged its rivals with software “nearly as powerful” as the U.S. companies, according to The New York Times, but they needed less powerful chips, according to The Wall Street Journal, making it less expensive to develop and run. Some prominent AI-related companies took significant market value hits.
The sudden new market realities have left some landlords and lenders worried, reports Bloomberg. A major data center landlord expects to see financing costs grow as lenders worry that the properties will become obsolete from the appearance of DeepSeek or some other unexpected player. An asset major who asked not to be identified told Bloomberg that many are concerned the AI market will act similarly to the green investment book. A flood of money enabled an oversupply of properties that drove down valuations.
And yet, the need for data centers goes beyond AI only. “A big difference between equity and credit valuations was highlighted, with many names losing significant market value (Broadcom and Nvidia the largest), yet bond-spread widening was limited to a narrow range of 10 bps or less,” wrote Robert Schiffman, Bloomberg Intelligence senior credit analyst, last week.
"Digital infrastructure has never been more important to providing reliable connectivity for business, commerce, and communication," CBRE wrote in May 2025. "Development of new data center facilities is not only accommodating advanced technologies like artificial intelligence but is also contributing to widespread economic growth." And data centers are needed for far more than AI.
Even if a company like DeepSeek can use less expensive chips and train software for far less than an OpenAI, Meta, or Google, it would still need the data centers that house and power its computers.