Happy Monday. Here’s what we’ve got today…

• A look at possible cracks in the data center thesis

• Plus, a pair of fund manager acquisitions for Apollo

Too many racks:

The data center thesis is now at the point in the cycle where questions are beginning to replace blind enthusiasm. Early concern over possible oversupply and broader disagreement over how much scale matters in AI could dent prior assumptions on the sustainability of large-scale digital infrastructure investment.

Analysts at TD Cowen wrote late last week that their channel checks indicate Microsoft has canceled multiple U.S. data center leases with at least two separate operators. The company has also pulled back on converting negotiated agreements into signed leases and has reallocated a "considerable portion" of its international spending back to the U.S. (suggesting a "material slowdown in international leasing").

This follows reports coming out of last month's PTC telecom conference that Microsoft had "walked away from multiple 100MW deals in multiple markets that were in early/mid-stages of negotiations," allowed letters of intent to expire on large-scale development sites, and abandoned plans for at least five land parcels under contract in major markets.

It's too early for definitive conclusions, says TD Cowen, but the takeaway is that Microsoft likely found itself with too much capacity after reevaluating needs.

Microsoft had previously been the most active lessee of data center capacity through 2023 and the first half of 2024, securing facilities based on forecasts that assumed substantial workloads from OpenAI—a relationship that now appears to be less strategically relevant.

Microsoft CEO Satya Nadella seemed to confirm his thinking on a possible supply-demand mismatch last week, stating in an interview that "there will be an overbuild" of AI infrastructure. He went on to say that Microsoft would be "leasing a lot of capacity in '27, '28," suggesting the company expects to benefit from oversupply-related discounts in the medium term.

That's a possible headache for investors who have bet big on the space: sponsor-led data center investment totaled $108 billion last year after growing 50 percent year-over-year since 2018.

Major deals include KKR and GIP’s acquisition of CyrusOne in 2021, DigitalBridge and IFM's $11 billion acquisition of Switch in 2022, and Blackstone's $10 billion purchase of QTS in 2021. In the edge data center market, EQT Infrastructure purchased EdgeConnex for $2.5 billion in 2019, while Brookfield more recently acquired French data center business Data4.

Blackstone also bought Australian operator AirTrunk in September for AU$24 billion and says the firm has become the largest data center provider in the world. It values its portfolio at roughly $70 billion and says it has a development pipeline representing $100 billion more.

On October's earnings call, Chief Financial Officer Michael Chae said Blackstone’s "data center platform was the single largest driver of appreciation in our real estate and infrastructure businesses and for the firm overall."

• Apollo Global Management (NYSE: APO) agreed to acquire Bridge Investment Group (NYSE: BRDG), a real estate investment firm with $50 billion in assets, for $1.5 billion in stock.

• Goldman Sachs Alternatives acquired a majority stake in Trackunit, a Danish construction equipment SaaS platform, from Hg and GRO Capital.

• Redding Ridge Asset Management, an affiliate of Apollo (NYSE: APO), agreed to acquire Santa Monica-based Irradiant Partners, a CLO manager with $11 billion in assets under management.

• Prosus agreed to acquire delivery platform Just Eat Takeaway.com for €4.1 billion in cash.

• Carlyle Group (Nasdaq: CG) and SK Capital Partners agreed to acquire bluebird bio (Nasdaq: BLUE), a Somerville, Mass.-based gene therapy developer, for $29 million upfront plus potential earnouts of $96 million.

• Seven & i, the owner of 7-Eleven, selected Bain Capital as the preferred buyer for a stake in a new group that will hold its noncore businesses, per Nikkei.

• CK Infrastructure submitted a £7 billion bid for a majority stake in Thames Water, the UK's largest water supplier, shortly after a reported £4 billion offer from KKR, per the Financial Times.

• Apollo Global Management is considering an acquisition of Fotowatio Renewable Ventures, a Madrid-based renewable energy provider, from Abdul Latif Jameel Energy & Environmental Services in a deal that could value the business at around $2.1 billion.

• J.C. Flowers & Co. acquired a majority stake in Infinite Investment Systems, a Canadian wealth management portfolio solutions provider.

• HarbourView Equity Partners agreed to acquire T-Pain's publishing catalog and select master recordings.

• National Grid (LSE: NG) agreed to sell National Grid Renewables, its U.S.-based renewable energy development business, to Brookfield Asset Management for $1.74 billion.

• KKR is preparing to sell BMC Helix, an IT management business being split off from BMC Software, which could fetch around $2 billion, per Bloomberg.

• Blackstone is in advanced talks to acquire VaxCare, an Orlando-based vaccine management platform for medical practices, from Summit Partners for around $1.7 billion, per Bloomberg.

• KKR agreed to acquire a controlling stake in Healthcare Global Enterprises, an Indian oncology hospital chain, for $400 million from CVC Capital Partners.

• Perpetual (ASX: PPT) terminated talks with KKR for the A$2.2 billion ($1.4 billion) sale of its wealth management and corporate trust units after an independent expert deemed the deal not in shareholders' best interests.

• Bain Capital submitted a £1.1 billion takeover proposal for UK defense contractor Chemring Group (LSE: CHG), per Sky News.

• J.F. Lehman & Company acquired Atomic Transport, a Chattanooga-based provider of bulk-waste transport and transfer station management services.

• RedBird Capital Partners is exploring the sale of its minority stake in Indian Premier League cricket team Rajasthan Royals, per Bloomberg.

• Equinox Gold (TSX: EQX) agreed to acquire Calibre Mining (TSX: CXB) in a C$2.6 billion all-stock deal that will combine their gold mining operations.

• Flowers Foods (NYSE: FLO) acquired Simple Mills, a Chicago-based maker of better-for-you crackers and snacks, from Vestar Capital Partners for $795 million.

• MongoDB (Nasdaq: MDB) agreed to acquire Voyage AI, a Palo Alto-based developer of tools to reduce AI hallucinations, for $220 million in cash and stock.

Tech, Vertical SaaS, & Misc. Enterprise

• NinjaOne, an automated endpoint management platform, raised $500 million in Series C extensions at a $5 billion valuation co-led by ICONIQ Growth and CapitalG, with participation from other private investors.

• Patlytics, an AI-powered patent workflow platform, raised $14 million in Series A funding led by Next47, with participation from Gradient Ventures, 8VC, Alumni Ventures, Liquid 2 Ventures, and Myriad Venture Partners.

• RAD Security, a cloud infrastructure security platform, raised $14 million in Series A funding led by Cheyenne Ventures, with participation from Forgepoint Capital, Lytical Ventures, Akamai, .406 Ventures, Vertex Ventures, and Gula Tech Adventures.

Consumer & Media

• Just Salad, a fast-casual restaurant chain, raised $200 million in new funding led by Wellington Management, with participation from D1 Capital Partners, Neuberger Berman, and Stripes, valuing the company at $1 billion.

• Khosla Ventures is raising $3.5 billion across three funds: a $1.75 billion core venture fund, a $1.1 billion growth fund, and a $650 million seed fund, per WSJ.

• Sculptor Capital Management raised $3 billion for its fifth flagship real estate fund.

• Gemcorp Capital is raising $2 billion for a new emerging markets private credit fund.

• Cambridge Innovation Capital raised £100 million for its new Opportunity Fund focused on growth-stage deep tech and life sciences investments, with backing from Aviva Investors and British Patient Capital.

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