When Big Tech Puts the Old Economy to Work

Big Tech Puts the Old Economy to Work: far from a sterile world, data centers smell of dust and diesel

The commonly held image of a data center is that of grey or white rooms packed with IT and telecom equipment, seemingly operating almost autonomously with minimal human presence. In reality, a functioning data center does indeed look much like this.

Before the white room: the construction site

Yet another reality lies behind this image: one of massive construction works that can be likened to large-scale public infrastructure projects. We typically associate public works with major infrastructure developments commissioned by state or local authorities — roads, sanitation systems, railways, utilities networks, and many others.

At first glance, the construction of a data center does not fundamentally differ from such large infrastructure projects, except for one key aspect: financing. The exceptionally deep pockets of major technology players allow them to undertake these colossal investments through their vast cash-flow generation and borrowing capacity, without recourse to public funds. This represents a fundamental shift in the traditionally accepted order: private companies, through data center projects, are now commissioning a wide range of private and public contractors, whereas historically it was public-sector contracts that engaged both private and public stakeholders.

To simplify, when a technology leader embarks on the construction of a data center, the process begins with surveyors, geotechnical and environmental engineering firms, lawyers, energy consultants and architects. This is followed by project managers, inspection bodies, safety authorities and notaries. Then come the main construction phases: earthworks, civil engineering, structural works, secondary works and technical trades — excavation, foundations, steel structures, waterproofing, electrical systems, generators, cooling, fire detection, cabling and fiber optics. The list is extensive.

Insatiable energy needs

Even before a single server or IT component is installed, a data center will already have generated significant activity for players from the “old economy.” Once operational, this contribution continues. Electricity consumption — regardless of its source — is an obvious necessity, as the reliability of energy supply is the top priority for any data center. The requirements of these giants (often exceeding 200,000 square meters) are immense, typically around 100 MW or more, and must be met without fail.

Unexpected partners

Several companies that might seem unlikely beneficiaries of IT-related projects are now enjoying strong tailwinds. Utilities are one example, as are manufacturers of HVAC (Heating, Ventilation and Air Conditioning) systems. But let us focus on a more surprising case: Cummins, a U.S. specialist in heavy-duty engines (for agricultural and mining equipment, trucks, ships and generators), a company in which NS Partners has been invested for many years.

While Cummins benefits indirectly from data center construction through engines used in construction and mining equipment, it is a very direct beneficiary of the critical need for highly reliable backup generators. Cummins — like Caterpillar — has decades of operational history in this type of engine technology, allowing it to offer immediate, time-tested solutions. For mechanical enthusiasts: the backup generator is a 95-liter diesel engine, capable of starting in under 20 seconds and delivering continuous power of 2.5 MW.

The acceleration in data center construction has therefore very likely contributed significantly to the company’s remarkable share price performance (+115%) over the past two years, even though it remains, in essence, an indirect player.

A trickle-down effect benefiting the entire economy

Cummins is not an isolated case. It illustrates the highly virtuous trickle-down effect that the current data center investment cycle is having on the real economy. Moreover, at this stage, financing does not appear to be a constraint, given the colossal resources available to technology giants to pursue their ambitions.

While major global equity indices may look expensive today, they are nonetheless supported by a productive investment cycle whose effects extend far beyond the technology sector — and crucially, without reliance on public funding. This is something to welcome.

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