As the global Artificial Intelligence (AI) trend continues to heat up, major domestic and foreign investment institutions such as Goldman Sachs, Brazilian BTG Pactual, Patria Investment Company, and General Atlantic are accelerating their presence in Brazil by constructing data centers to capitalize on this trend.

Why has Brazil become a "paradise" for data centers?

According to McKinsey estimates, by 2030, global data center construction is expected to require an investment of around $7 trillion (39 trillion Brazilian reais), with a significant portion directed towards the field of artificial intelligence. In Latin America, Brazil is emerging as an ideal location for constructing such "digital real estate." The Brazilian Data Center Association estimates that the construction of new data centers will add approximately 2,000 megawatts to the existing installed capacity of 800 megawatts nationwide. The market anticipates that this expansion will necessitate an investment of around $20 billion (approximately 110 billion Brazilian reais).

Alessandro Lombardi, President of Elea Data Center, an investment in which Goldman Sachs is involved, stated, "Brazil is showcasing its strong potential for hosting data centers. To our knowledge, Brazil is one of the countries with the greatest potential for renewable energy development globally, with a well-established infrastructure."

Lombardi pointed out that Brazil's good diplomatic relations with the United States, China, and European nations are also important factors in attracting such investments.

According to data released by the Brazilian Ministry of Mining and Energy, seven companies have announced plans to construct data centers in Brazil with installed capacities exceeding 100 megawatts. These projects are all associated with major investment institutions, including Digital Bridge with assets under management of $96 billion and Actis, an infrastructure investment firm with assets under management of $108 billion.

In the state of Ceará, Brazil, Chinese tech giant ByteDance is constructing a data center that will become the largest project of its kind in Latin America. With an IT load capacity of 200 megawatts, the project is expected to involve an investment exceeding 200 billion Brazilian reais.

Why are capital investments flooding into data centers?

Despite being technology-intensive, data centers are still perceived by large investors as real estate assets. With the rapid development of artificial intelligence, the expansion of information processing facilities is driving a new sector in the real estate market, attracting capital that was originally directed towards fields like logistics and warehousing.

Tito Costa, Revenue Director of Tecto, a company under BTG Pactual, explained, "Data centers are like hotels for computers. Clients can rent a room, a data center, or even a square meter of space. Inside, there are racks, air conditioning, and stable power supply."

Investors are responsible for constructing data centers to house supercomputers. After completion, leasing contracts typically last for ten years and can be renewed for another ten years. Rent includes maintenance services such as power supply and extensive water usage. In practice, maintenance is no easy task as the high heat generated by high-performance chips requires continuous cooling. Therefore, efficient cooling systems are crucial, consuming significant amounts of electricity and sometimes requiring the use of drinking water to prevent equipment contamination, posing challenges for water resource recycling.

It is estimated that major tech companies may need to invest around $100 billion (approximately 546 billion Brazilian reais) to purchase imported equipment to fill Brazil's data centers. Companies are willing to invest substantial funds because the returns are equally significant. Rodrigo Abreu, Partner at Patria Investment Company, noted that just ByteDance's data center in Ceará state could generate about 16 billion reais in service export revenues annually.