Exclusive-Data center operator Switch weighs IPO at about $40 billion valuation, sources say

By Echo Wang and David French

NEW YORK (Reuters) - The owners of Switch are exploring an initial public offering (IPO) of the data center operator that could value it at about $40 billion, including debt, according to people familiar with the matter.

The discussions on an IPO for Switch are at an early stage, the sources said, cautioning that the plans are subject to market conditions and no final decisions have been taken.

The investment firms that own Switch have in recent weeks held preliminary talks with investment bankers on the potential stock market flotation that could happen as early as 2025, the sources said, requesting anonymity as the discussions are confidential.

The move comes at a time when investor interest in generative artificial intelligence is sky-rocketing. The AI boom, which has powered chipmakers such as Nvidia and other big tech firms, has turbocharged global demand for infrastructure such as data centers and high-powered servers.

Las Vegas-based Switch was taken private by DigitalBridge and IFM Investors for $11 billion in 2022. Australian pension fund Aware Super bought a minority stake from Switch's owners in 2023.

DigitalBridge, IFM and Aware Super declined to comment. Switch did not immediately respond to a request for comment.

Dealmaking in the data center and server industry has also witnessed an uptick in recent months due to the proliferation of AI.

Earlier in September, Blackstone clinched a deal to buy Australian data center group AirTrunk for more than A$24 billion ($16 billion). In August, AMD agreed to acquire server maker ZT Systems for $4.9 billion, as part of its efforts to expand its portfolio of AI chips and hardware and battle Nvidia.

Founded in 2000 by technology entrepreneur Rob Roy, Switch counts Nvidia, Dell Technologies, and FedEx among its top customers.

Since January 2016, Switch's data centers have been powered by renewable energy, according to its website. This makes its operations attractive to technology companies, which have environmental impact targets and are attempting to accelerate investments in decarbonization without inhibiting growth involving power-hungry data centers.

The global data center boom is expected to produce about 2.5 billion metric-tons of carbon dioxide-equivalent emissions through the end of the decade, according to a recent report from Morgan Stanley.

($1 = 1.5017 Australian dollars)

(Reporting by Echo Wang and David French in New York; Additional reporting by Lewis Jackson in Canberra; Editing by Sonali Paul)