Big Technology Podcast · Wednesday, August 12, 2026
Paul Kedrosky explains that capital providers increasingly view data centers through the lens of commercial real estate, comparing their expected returns to cap rates on multi-tenant apartment buildings. This perspective suggests that the required yield for AI infrastructure investment is driven by comparable market returns, not just the sheer scale of capital deployed.
“So data centers from the context of many capital providers are real estate. They're really just multi-tenant apartment buildings. It just so happens there's no humans in the apartment building. There's just GPUs.”
“So increasingly the providers of capital for these things look at it in that context. And say, well, what's the yield in terms of I'm contributing, you know, 100 billion dollars to some massive meta project. What's my reasonable cash flow expectation? Very much analogous to what I might expect from the cap rate on a multi-tenant apartment building.”
“So the correct way to think about it for better or worse is to analogize it to commercial real estate and ask yourself what kind of cap rates that they can get on comparable projects and that is the really the answer.”