How a Data Center Makes Money
A data center is a power contract with a building wrapped around it. Retail colocation earns from many small tenants and the connections between them; hyperscale earns from one very large tenant and the length of its signature. Both produce revenue that is contracted in advance and priced per kilowatt of reserved capacity, which is why capital markets classify the asset as infrastructure. Faraday's read: the classification is right about the cash flows and incomplete about the risk. A pipeline's customers need the same molecule for decades. A data center's customers need whatever the newest chips demand, and they can leave when the lease runs out.
Knowledge check
Why do investors often treat a hyperscale data center leased to a large cloud provider as infrastructure rather than ordinary real estate?
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Because its revenue is contracted in advance for long terms, paid by a creditworthy counterparty, and protected by high barriers to building a competing facility, especially access to power. That combination produces predictable cash flows that can be valued like a bond. The analogy weakens on obsolescence, because the equipment inside a data center changes far faster than a pipeline's.