The Power of Information: Investment Opportunities in Data Mining
Internet traffic has exploded during the Covid-19 outbreak. Millions of people around the world are working from home, studying in virtual classrooms, video calling with relatives and binge-watching on Netflix, all of which has put increasing strain on the virtual plumbing that keeps our data flowing.
Except that it isn’t “virtual”, of course. The internet works by magic as far as most of us are concerned, but it’s really a huge computer network that isn’t even slightly virtual. The wireless router sitting behind your television or next to your desktop is connected to every other router in the world thanks to millions of kilometres of cables that run under the ground, rest on the seabed and dangle from telephone poles.
If that seems incredible, it should. But it’s also a problem, and not only when large swathes of the world are quarantined at home. As more people do more stuff online, especially in developing countries, it’s no longer good enough to be pinging out data from a rack of servers sitting in California. To avoid those dreaded spinning rings that tell us our movie is buffering, streaming companies are going local, putting their huge data libraries as close to customers as possible to avoid internet bottlenecks. And the same is true of every other kind of online service, from social media to software.
Companies are also storing more data about us than ever before, tracking our online behaviour, as well as our offline behaviour, such as where we are in the world, and feeding it to algorithms that predict what we want to buy or watch or listen to.
All of this is creating huge demand for ever bigger data centres. For investors, this has created a kind of gold rush, as data centre companies seek funding to build so-called hyperscale facilities with thousands of servers. Until recently, most of these were in the US and belonged to companies such as Amazon, Google and Microsoft, but China is catching up quickly.
“We call it Chinascale, because it’s bigger than hyperscale,” says Oliver Jones, chief executive of Chayora, a Hong Kong company that focuses on building data centres in Mainland China. “There’s going to be more data centres built in China in the next 10 years than the rest of the world put together.”
The levels of technical innovation in artificial intelligence, machine learning and related applications in China mean that data volumes are growing exponentially, according to Jones.
One of the biggest investors in this field is Actis, a British private equity firm that led a US$180 million Series-C investment in Chayora in October through its Asian real-estate funds.
Chayora already has a data centre building on an 32-hectare campus in Tianjin that serves the greater Beijing area of 150 million people. The new injection of cash will support the acquisition of further land in Tianjin and also the first land plots for planned centres in provinces neighbouring Shanghai.
We call it Chinascale, because it’s bigger than hyperscale
China is only one of the opportunities at which investors are looking. Another is Africa, where data centres are few and far between, but the continent’s economies are increasingly going digital, data is migrating to the cloud, and companies are using artificial intelligence to analyse big data.
“Africa is at an inflection point and we expect to see an explosion in growth of demand for hosting capacity in independently owned data centres across the continent,” says David Morley, head of real estate at Actis.
The biggest African market except South Africa is Nigeria, where Morley recently led an investment into the country’s leading data centre company, Rack Centre, which is looking to build its capacity to 10 megawatts of computing power from 750 kilowatts currently.
Chinese money has been at the forefront of backing Africa’s economic development during the past decade or so, especially when it comes to building physical infrastructure such as roads, railways and power stations, but investors from China are only just starting to look at the opportunities in African data.
In December 2019, China Telecom agreed a partnership with Africa Data Centres, the continent’s biggest data centre company, through its Johannesburg facility. The deal will give the Chinese company a key foothold in this exciting market.
“China Telecom’s investment in Africa Data Centres’ points of presence means our customers can look forward to reliable, low-latency, worldwide connectivity,” says Stephane Duproz, chief executive of Africa Data Centres, who adds that China Telecom’s presence “heralds the start of a long and fruitful relationship aimed at growing co-location services across the continent”.
As many of us experience quarantine for the first (and hopefully only) time in our lives, the value of digital connectedness has never been more apparent. From grandparents connecting with their grandkids to remote workers having virtual meetings with clients and colleagues, the demand for data is headed in only one direction—and that creates an unprecedented investment opportunity, whether in China, Africa or other markets around the world. Data might be the new gold—but, unlike the yellow metal, it is not a finite resource.
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