The Rise of the “Fake” Data Center Developer — And How to Tell the Difference

With computational requirements from recent AI developments growing significantly and our digital economy continuing to expand, the race to quickly build new data center capacity is fiercer than ever. Most recently, the Chinese AI company DeepSeek claimed to create a sophisticated machine learning model at a fraction of the cost when compared to major U.S. AI companies’ requirements — an announcement that sent the stock market into a tizzy and kicked the digital infrastructure industry into a new phase of potential exploration.

Notwithstanding public proclamations of increased AI spending, clarity into how much capacity will actually be needed is lower than ever, increasing the cone of uncertainty we’ve discussed in the past.

To reduce uncertainty and ensure crucial capacity is available when and where it’s needed, the largest data center users are trying to shorten the time between when demand is confirmed and when capacity comes online. To accomplish this, these players are seeking out developers that have the financial wherewithal, technical understanding, and industry credibility to proactively develop land, secure power, and complete developments efficiently.

Yet, there’s a difference between proactive development and purely speculative development, and environments like the one we’re in — characterized by massive but uncertain demand and constrained supply — tend to bring speculative developers out of the woodwork. Industry luminary Daniel Golding dubbed it the “age of fake data centers.”

Part of why we are happy to proactively develop a campus is that our early investment simplifies the competitive landscape a great deal. Unfortunately, across the array of established developers, there’s no disincentive for speculators to buy or encumber land and seek utility interconnection at grossly overestimated levels of demand. These speculators are trying to secure a place in the queue for utility capacity at the lowest possible cost and with no customer in mind. The result is inflated market-based demand estimates that make it appear as if power capacity is running out faster than anticipated, which forces our utility partners to spend time trying to separate the real from the fake demand in their markets. That creates real constraints for the developers actually putting steel in the ground with a customer in tow.

Differentiating the real from the fake is essential for utilities to get a handle on their actual pipeline. It is also essential for investors and end users to allocate their capital, time, and trust accordingly.

What differentiates a ‘real’ developer?

Real developers actually reduce the cone of uncertainty. Foundationally, this means they must have scalable access to capital, products that support flexibility, and OFCI (Owner Furnished Contractor Installed) practices and supply chains that are strong, resilient, and ease replicability across footprints. However, even more fundamental to hyperscale success (and perhaps more elusive in the market) are developers that pair these operational advantages with a deep awareness of how to be a good partner — not just to tenants but also to the utilities and the communities they work in. These are the criteria we think create real developments based on real insight:

Really, really, really smart people and systems

We’re fortunate enough to have hired some very bright folks from some of the best organizations in our industry. For example, our location strategy and site development team is a top performer on behalf of customers because it uses experience based on deep relationships with utilities and municipal leaders. These relationships give us access to the facts and realities needed to accurately predict the future without over-assuming or under-planning. Furthermore, a thorough methodology includes a robust diligence process (supported by a 200+ item checklist) and sophisticated proprietary software to consistently help uncover utility capacity and de-risked land that competitors tend to miss. These people and systems help us know how and where to invest for the future without straying into the realm of pure speculation or taking any gambles.

Being ‘real’ does not stop with sourcing land sites and utilities. Real also means establishing collaborative customer relationships so we’re ready to meet the industry’s rapidly changing requirements. As another example, when our product innovation team saw the AI sea change coming, they knew that it would require direct liquid cooling (DLC). Working closely with our customers, we developed a configurable and innovative proprietary DLC design that supports both air cooling and liquid to the rack with lower costs and less supply chain risk than off-the-shelf DLC solutions. Pairing educated forecasts for the future with creative (but conscientious) innovation like this is how developers can keep momentum without heading into fake demand or supply territory.

Keeping it real (and transparent)

Real developers understand the importance of making sure the customer is always in the loop and always at the table, and they have nothing to hide. But importantly, this is a feedback loop that goes both ways. When communication is close, clear, and based in trust, everyone is operating from the same expectations and understanding of the complex utility dynamics, developers can stay in lock step with the customer’s real needs, and the degree of uncertainty is at its minimum.

These tightly knit relationships are at the core of creating developments that stay rooted in what’s fast, precise, and able to provide superior performance without becoming unreal. To safeguard developments throughout the build process, taking this collaborative approach to working with supply chain partners and vendors — and leveraging OFCI practices — is also becoming even more important.

Being in the rooms where innovations are taking place, institutionalizing new processes and technologies, and ensuring everyone benefits from lessons learned is what creates continuous improvements that insulate against quick market changes and the uncertainty they can create. 

Your trust is your track record 

A history of operating with key customers and key utility providers matters. Utility providers are looking to understand what’s real or fake in their territories, and there’s no replacement for a history of successful projects delivered with a utility partner. Similarly, a depth of understanding and transparency between developers and customers or investors is something that’s built with time, consistency, and integrity across successful deployments.

In a fast-moving market, avoiding the temptation to stretch reality and being a good actor is how you create this foundation, and it becomes the track record that helps developers stand out as real partners instead of fake providers.

Sourcing teams are under immense pressure to find capacity that can be delivered within a set of prescribed parameters (time, network, geographic location, etc.). At the same time, transaction sizes and demands create a great deal of pressure on lease providers and their investors to lean forward too much and stretch the truth to land a lease or agreement with a key tenant.

While the temptation is clear, after more than 25 years delivering data center services to the world’s most exacting companies (and the commitment to be here another 25 years), we hope we’re able to zero in on what really matters to our customers and our partners. What matters now more than ever is a customer’s ability to trust that a developer would rather miss out on a deal than overcommit, act in bad faith, or try to get by without offering full transparency into what’s realistic. We’ve seen what happens to providers who tell a great story without delivering a great product, and unfortunately, a growing number of data center customers have too.

Oversharing is important

While oversharing can be awkward on a first date, it’s critical when managing a complex and expensive project like a data center campus. To succeed, developers and customers must have frank and open communication — the kind that can only come with the comfort established relationships provide. In these development relationships, the customer understands that the developer is navigating the same challenges the entire industry faces (supply chain, utilities, labor shortages, etc.) and will have ‘bumps in the road’ as a result. However, they also know their developer can manage challenges and will keep them apprised of any potential impacts while working on proactive solutions.

For example, a key tenant recently told us a big differentiator comes down to proactivity in communicating challenges, plans, and alternatives so they know exactly where a project sits. In contrast, less experienced developers, this tenant told us, wait until the last possible minute to share news that affects delivery dates and end-user commitments. 

Data center development can’t be a first date. Nobody can be putting their best foot forward and hiding the things they’d prefer their partner not to see, because that undoubtedly leads to overblown promises and disillusionment down the line, even if the relationship seems great today. Developers have to be real (and real good, at that).

Not many data center developers were around in 1999 when Google was just one year old, and Mark Zuckerberg had just started high school. But age isn’t the only determinant of ‘realness.’ Ultimately, success in this market comes down to having the reputation, longstanding relationships, and trusted transparency with hyperscale customers, capital partners, and utility providers to really help them deliver in the way they want.