The global data centre boom is faltering as credit risks, rising tariffs, and capital costs take hold. Valuations have dropped by as much as 40%, projects are being delayed or cancelled, and hyperscalers are stepping back from long term deals as the sector undergoes a major reset.
The global data centre boom is faltering, caught in the crosswinds of deepening credit risk, collapsing valuations, and a dangerous resurgence of trade protectionism. Once considered the critical infrastructure powering the AI and cloud age, data centres are now facing a sharp correction. Asset values have fallen between 30% to 40% from their 2023 highs. What began as a cooling of investor sentiment is now evolving into a full-scale strategic reset.
The root causes are structural. Two dominant forces are reshaping the landscape: rising capital costs and the extended consequences of global tariff escalation. The latest wave of U.S.-led protectionism—reviving the Trump-era isolationist playbook—has imposed blanket 10% tariffs on imports, with specific duties reaching 34% for China, 32% for Taiwan, and 25% for South Korea. These measures have dramatically raised the cost of data centre construction and slowed supply chains, just as interest rates and inflation are squeezing financing models worldwide.
A global shift in data centre development has already been signaled to the market. Industry observers are maintaining a close eye on the investors—as they continue to observe Amazon, Microsoft and Google, the largest hyperscalers globally, are starting to shift tactics due to the tariff war. Once happy to pre-commit to long-term data centre leases, they are now demanding “build-on-spec” arrangements—shifting financial and operational risk back onto developers. The result is a dramatic power reversal. Developers must now absorb construction and leasing risk in a volatile environment where capital is expensive and tenant certainty is elusive.
Microsoft is pulling out of data center projects, from London to Jakarta, pointing to changes in its strategy, sources say https://t.co/cLclcoYxVz
— Bloomberg (@business) April 3, 2025
Bloomberg's latest report on Microsoft's data centre projects.
Australia’s Goodman Group is a case in point. Touted earlier this year as a resilient player, Goodman’s $4 billion capital raising initiative appeared well-timed. But cracks are showing. In February, the company’s retail offering raised just $5.1 million out of a targeted $400 million. This stark shortfall underscores how cautious capital has become, even for one of the region’s most experienced operators. It’s a clear sign that the financing climate has shifted.
Credit spreads have widened, lending conditions have tightened, and risk premiums are rising sharply. Even strong, well-capitalised developers are now being forced to build without confirmed tenants—an uncomfortable new norm driven by the changing demands of hyperscalers like Microsoft, Google, and Amazon. These tech giants, under mounting pressure themselves, are shifting risk downstream. Developers are now absorbing the bulk of construction and leasing risk, without the traditional security of pre-commitments.
This environment has led to a wave of retrenchment across the Asia-Pacific. Several 100MW+ data centre projects have been delayed, downsized, or shelved entirely. Feasibility is being re-evaluated. Build plans are being phased or suspended. Developers are reassessing cash flow assumptions and contingency models, while financiers are becoming more selective and cautious.
Beyond the infrastructure sector, the shockwaves are reverberating through global tech markets. The fallout from the April 2025 tariff escalation has hammered equities. Tech stocks, in particular, have been hit hard, with the “Magnificent Seven” losing significant value. Microsoft has seen sustained share price pressure, in part due to growing competitive threats from China’s approach to efficient innovation with DeepSeek, which shocked the market in January—highlighting a possible AI bubble in Silicon Valley. The platform’s rapid emergence rattled investors, challenging assumptions about Western dominance and fuelling concern over inflated valuations in the AI infrastructure race.
As margin expectations in the AI race narrow, so too does the justification for aggressive data centre expansion. Investors are now demanding clearer return profiles, stronger cost discipline, and defensible strategic positioning.
Credit quality is now the critical fault line. As hyperscalers retreat from upfront commitments, developers and their financing partners are left exposed. Lenders are tightening standards, reassessing risk, and in many cases, pulling back. Only those with top-tier credit ratings or deep institutional relationships are able to move projects forward. Mid-tier developers are already finding themselves priced out of the capital markets.
HMC Capital is another example of pressure mounting. With its shares trading far below IPO levels, the firm now faces the need to raise nearly double the equity to fund the same ambitions. This includes its $950 million renewable energy acquisition and the protection of rental streams from Healthscope-linked assets. The mismatch between capital market expectations and the real cost of funding is growing—and it’s putting even seasoned investors under strain.
The macro signals are just as ominous. U.S. markets have reacted sharply to April’s tariff announcements. The Dow has dropped 2,200 points, while the S&P and Nasdaq have posted their worst days since the COVID crash. Amazon, Nvidia, Meta, and Apple have each lost over 7%, with Apple’s market cap alone shedding $300 billion in value. Major banks have moved swiftly: JPMorgan now estimates a 60% chance of recession by year-end, with Goldman Sachs raising its own forecast from 20% to 35%.
If these trends persist—especially amid a tariff-induced global slowdown—the data centre sector could face an extended period of stagnation, capital scarcity, and underutilised assets. While demand for AI and cloud computing remains intact, the ability to build and finance infrastructure at scale is no longer assured.
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