U.S. data center fundraising hits record high, Goldman Sachs warns: Recent momentum is strong, but beware of long-term "oversupply" risks

Concerns Behind the Data Center Boom: Goldman Sachs Warns of Long-Term Oversupply Risks.

According to news from the Chasing Wind Trading Desk, this week Goldman Sachs analyst Vinay Viswanathan pointed out in a research report that the market size of the data center securitization has surged from $5 billion to $30 billion, covering asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS) structures. This explosive growth is primarily driven by large-scale investments in facilities equipped with thousands of GPUs that provide computing power for large language models. The analyst stated:

Securitization has become a stable and scalable source of financing for the capital-intensive digital infrastructure industry.

Earlier this year, the growth of the data center securitization market stagnated due to concerns about demand for data centers related to increased efficiency in artificial intelligence and rising tariff uncertainties. However, pricing and issuance volumes have rebounded significantly, bringing data center securitization back on track and potentially setting new highs by the end of the year.

Goldman Sachs analysis indicates three key factors supporting short-term market momentum:

• Surge in cloud computing capital expenditures: Major hyperscale cloud service providers (AWS, Microsoft, Google, Meta, Oracle) have all raised their capital expenditure guidance for Q1 2025, indicating strong forward demand for AI cloud services.

• Tight supply situation: The vacancy rate of major data centers in North America is expected to hit a historical low of just 1.9% by the end of 2024, with 72% of new capacity already pre-leased.
• Policy support: The Trump administration's Stargate initiative has prioritized generative AI infrastructure as a key focus for the U.S. government, further encouraging private sector investment.

Long-Term Supply-Demand Imbalance Risks Emerge

Despite the optimistic short-term outlook, Viswanathan remains cautious about the long-term supply-demand balance. The Goldman Sachs team expects that the data center market will reach peak occupancy rates by mid-next year, followed by a gradual slowdown in the coming years.

The analyst warns that two key factors support this judgment:

• First, the pipeline of planned data center projects continues to grow, leading to a steady increase in completion volumes, with the Stargate initiative expected to further boost future supply.
• Second, such a high rate of supply growth sets a high bar for the demand growth of AI workloads to maintain occupancy rates flat over the next two years.

Viswanathan specifically pointed out:

If the second derivative of AI demand turns negative (indicating a slowdown in AI demand growth), this could drag down rent growth and lease renewal rates. This would particularly harm the re-leasing success rate of highly customized, tailor-made data center assets, as these assets inherently carry a higher risk of obsolescence As summarized by Viswanathan, the boom in data centers will not last forever. The pendulum will eventually swing from scarcity to surplus—when that happens, the feast will come to an end. Before that, investors can still seize opportunities, but they must not forget: every feast has an end.

For investors, the current stage should focus on timing the market, enjoying the dividends of AI infrastructure construction while closely monitoring changes in supply and demand balance to proactively avoid long-term surplus risks