I Squared Capital buys $225M data center portfolio for AI infrastructure
In brief
- I Squared Capital acquired 10 data center facilities from Cogent Fiber for $225 million, gaining 53 megawatts of power capacity.
- Portfolio spans Chicago, Atlanta, Phoenix, California, and Texas; focuses on AI inference and colocation services.
- Transaction closes Q3 2026; I Squared commits up to $1 billion for upgrades and expansion.
- Urban colocation enables faster AI deployment than hyperscale builds, which cost billions and take years.
- Legacy data centers shift capacity from crypto mining to higher-margin AI workloads.
The AI Shift in Data Center Economics
I Squared Capital just wrote a $225 million check for 10 data center facilities from Cogent Fiber, LLC. The transaction values the portfolio at roughly $4.25 million per megawatt—a disciplined entry point into urban colocation assets. Cogent Communications plans to use the proceeds primarily for debt reduction, allowing the fiber-optic network operator to deleverage while exiting non-core real estate.
The deal signals a structural realignment in how data center capacity gets deployed. The new platform will focus on three areas: colocation services, high-density deployments, and AI inference infrastructure. This positioning matters because hyperscale data center builds—the kind that Microsoft, Google, and Amazon develop—can cost billions per site and take years to construct. Urban colocation facilities offer an alternative: they can be upgraded and brought to market faster, serving enterprises that need AI inference but don't want to build their own infrastructure.
Crypto Mining's Downside Pressure
Data center facilities that once hosted crypto mining operations face economic pressure to reallocate rack space toward higher-margin AI tenants. This dynamic has already played out in the mining sector itself. Several publicly traded mining companies have pivoted portions of their capacity toward AI and high-performance computing.
The retrofit challenge is real. Retrofitting legacy data centers for high-density AI workloads is expensive and technically complex. Power availability in urban markets is constrained, with some cities imposing moratoriums on new data center construction due to grid capacity concerns. I Squared Capital's $1 billion commitment suggests the firm is betting that selective acquisition and upgrade of existing facilities—rather than greenfield hyperscale builds—will unlock margin in this constrained environment.
The transaction requires regulatory approvals and is expected to close in Q3 2026, with the earliest potential closing date set for June 12, 2026.
