Navigating the Data Center “Gold Rush”

Data center demand is driving billions of dollars in investment into everything from real estate and electrical infrastructure to hardware, cooling technology, and other equipment. This fast-paced growth is having a significant impact on the equipment finance sector as well as the overall economy. 

“I’ve been [in this industry] for around 35 years, and there have been many of these ‘gold rush’-type moments,” says Mike Fitzsimmons, Vice President, General Manager for the Construction and Material Handling Division at Summit Funding Group, Inc. He says that such “gold rush” moments can be exciting but require a disciplined approach that aligns with a lender’s policies and strategy, along with being mindful of the inherent risks in any burgeoning market.

A Shifting Landscape

A 2025 Equipment Leasing & Finance Foundation (Foundation) study reported that U.S. data centers were a primary force in equipment and software investment during the first half of the year, accounting for roughly one-third of real gross domestic product (GDP) growth. Data centers, which range from an estimated $200 million to more than $1 billion to build, drove $30 billion in financing in 2024, doubling in 2025. Demand for new data centers also helped drive construction spending to an “all-time high” in early summer 2025, according to Foundation data. For equipment finance companies, such growth offers opportunities as well as risks. According to ELFA’s 2026 Credit Manager Survey, nearly one in five respondents (19%) are looking to increase exposure in AI and data center financing.

What data center deals typically look like has changed in recent years. “From a financing standpoint, the market has changed dramatically over the past few years. Historically, we were financing individual assets—servers, generators, and other equipment supporting data center operations,” says Jon Watt, Senior Vice President, Portfolio and Asset Management, PNC Equipment Finance. “Today, the scale of data center development is far greater, requiring large, sophisticated operators and developers to lead the construction and deployment of these facilities. As a result, financing structures have evolved alongside the industry's growth.”

The complexity of many deals requires a layered capital stack, says Kyle Quearry, President of CCA Financial, that may include financing for real estate, power infrastructure and interconnection, and other construction costs, along with equipment financing for servers, switches, generators, and other IT and power assets. 

“We’ve grown up on IT equipment finance. AI is driving tremendous demand for assets that support those companies,” Quearry says. Currently, he sees the mix of what matters most to these companies has shifted, with high demand for GPU-backed servers in addition to traditional CPU servers, as well as generators for backup power.

Miles Herman, Chairman and CEO of LEAF Commercial Capital, Inc., and his team have also seen the market change in data center investing. LEAF’s emphasis is on partner-led equipment finance strategies that support resellers rather than directly targeting end users. The firm is also focusing on hyper-scalers, like Amazon and Google, and neo cloud providers, which are newer cloud infrastructure companies that support AI workloads.

“We don't spend as much time at the end user side as we are most often brought in by manufacturers, developers, distributors, or resellers; we don't get involved in the real estate elements of it. There are other people that are more equipped,” he says. 

However, Herman’s team also sees more customers who are upgrading their own servers that sit in co-location data centers—data centers where businesses rent space for their own servers and networking equipment instead of using the center’s equipment to support their work. This may be seen as a less risky opportunity because the credit is tied to the end user. 

Some firms are doing their homework before diving too deeply into the data center waters. Shari Williams, Chief Risk Officer, Elevex Capital, LLC, says her team knows that data centers offer an important opportunity for the firm. However, as a more generalist equipment finance lender, they are carefully considering various aspects of data center financing. In addition to complex, phased data center deals, she says she is increasingly seeing deals that resemble traditional project finance opportunities that are tied to broader buildouts rather than the equipment itself. For example, the viability of the project may be based on the clients and cash flow of a completed project rather than on the business’s historical financial record.

“Because of the uniqueness of the request, we are ensuring, for example, that the leases on the facility are at least as long as or exceed the term of the transaction. We're still looking for things like landlord waivers, mortgagee waivers. We're still looking to secure the transaction, not just through a traditional UCC [collateral], but also through fixture filings,” she says. In addition, if they’re underwriting servicing or software, she looks for transferability for those aspects so they can be outsourced if need be. Her team also wants to know how important the borrower is in the industry, who its clients are, and the type of equipment being financed, to ensure the deal is structured properly for everyone.

Understanding the Risks

As the market matures and more segments evolve, one constant remains, Herman says: underwriting data center deals is becoming more complex as companies try to mitigate their risk. Like any new and burgeoning market, data centers can be fraught with pitfalls. A May 2026 report from Goldman Sachs found that, historically, just 72% of data centers scheduled to launch during the following four quarters went online on time. When researchers adjusted for issues like skilled labor shortages, as well as shortages of equipment and semiconductors, they estimate that “approximately 60% of capacity scheduled for the next year will materialize on time, dropping to roughly 50% in the next two years,” according to the report.

Still, despite demand, some worry about the potential for a data center “bust.” “I've been through these types of cycles and these types of industries before, and they do always seem to over saturate because everybody's trying to get in,” Fitzsimmons says. “Everybody’s in this race to build and you end up overbuilt.” Once the market softens, even if it’s not for a while, there may be more consolidation and growth will likely stabilize, he adds, “as opposed to the hockey stick shooting up through the roof.” 

Among the other development challenges data centers face have been increasing pushbacks from communities. The first quarter of 2026 saw an unprecedented surge in blocked and delayed projects, with at least 75 data center projects worth approximately $130 billion blocked or delayed in the first three months of the year, according to data from Data Center Watch, a research firm that tracks data center opposition. That’s roughly the equivalent of the data center projects blocked or delayed in all of 2025, the firm reports. 

With communities up in arms about the impact on their power and water supply, noise, and other issues related to data centers, equipment finance firms must also consider such pushback as a risk factor.

“The community risk is very real,” Herman says. His team reviews the locale, whether it was difficult to get permits, and what the general attitude is toward data centers. “[We want to] make sure that we're not in a situation where they get something underway, and then all of a sudden, when they go to upgrade, they find that the demands for that facility make it a challenge,” he says. 

Quearry says that his firm would be cautious about funding a deal in an area where local opposition or laws have been strongly anti-data center. However, there are many locations that are “friendly” to the facilities, such as Texas and parts of Virginia, he adds: “The voters and the politicians of the localities can make the decisions for themselves, and that's what they want to do. We will keep financing equipment and not dig into their business,” he says. 

Finding the Right Opportunities

Evaluating data center deals and determining whether a particular deal is a good fit for your firm requires a few best practices. Watt takes an asset manager’s approach and looks first at the underlying asset. In addition to the amount being financed, he looks at the useful life of the asset and whether there’s a secondary market. In an industry where technology like semiconductors, chillers, and other equipment can evolve quickly, those can be challenging questions to answer. 

Watt says “probably the biggest challenge” of data center financing is finding the right mix of assets that have longer and shorter useful lives. “It’s balancing the tenures and structures versus what the ultimate project driver is,” he says. In other words, the parts and components necessary for a data center to be successful may need replacement and refreshing regularly for the data center to be successful. Deals need to be structured so that they allow for changes in the underlying value of those parts and components. 

Fitzsimmons says he prefers to see diversity within borrowers’ business models, too. “Any time we have a customer looking to borrow money to acquire equipment that is 90% or 100% focused on one specific industry, we’re going to look at that closer because they’re more susceptible to the ups and downs of the market,” he says. 

Like many lenders, Elevex is approaching the space with discipline to ensure data center exposure is part of a balanced portfolio. “We're looking to have this be a meaningful way of diversifying our portfolio and participating in a segment of the economy that is dramatically growing and providing a value add, but we will not become overly concentrated,” Williams says. 

The firm is also using AI to evaluate AI deals. The company integrates AI technology into its process, from deal origination through underwriting and documentation to help with research. “We have very much a trust but verify mentality, but we are using various platforms,” she says. Team members use Claude to assist with industry research and have been developing internal tools to assist with analyzing an applicant’s financial data. 

For equipment finance companies, data centers are an intriguing market with options for deals of different sizes. However, members agree that a disciplined approach is best when it comes to this fast-growing and changing market.

Herman is bullish about the future of data centers. Still, it’s a developing market that deserves careful attention. While his firm is not opposed to large deals—LEAF does many transactions “in the mid-eight figures,” he says—they may look to partner with others on certain deals as a risk-mitigation effort. 

“More than anything, we run a balanced business,” he says. “So, we have to make sure we’re balancing risk and reward.”