Data Center Build-Out Supports High Valuations: Bilicic

George Bilicic, managing director and global head of power, energy & infrastructure at Lazard, said the ongoing data center build-out is a significant factor supporting high valuations in the energy and infrastructure sectors. Speaking on "Bloomberg Deals," Bilicic highlighted that the surge in demand for data processing and storage is driving substantial investment in power generation and grid infrastructure. This build-out is not just a temporary spike but a structural shift, as hyperscalers like Amazon, Microsoft, and Google commit to expanding their data center footprints globally. The International Energy Agency estimates that data centers could consume up to 8% of global electricity by 2030, up from about 1% today, underscoring the scale of this demand driver.

For energy commodities traders, the data center boom translates into increased demand for natural gas and renewable energy sources, as operators seek reliable and scalable power supplies. This structural shift supports higher long-term price expectations for natural gas and electricity, while also boosting the outlook for infrastructure assets like pipelines and transmission lines. The impact is visible in the natural gas market, where the Henry Hub forward curve has shifted upward, with prices for 2025-2027 delivery trading at a premium to near-term contracts, reflecting expectations of sustained demand. Similarly, renewable energy certificates and power purchase agreements are seeing increased activity, as data center operators look to secure long-term, low-carbon power. Live fuel prices and charts on NowPrice reflect how markets are pricing in this demand growth, with natural gas futures recently hitting multi-year highs on the back of rising power demand forecasts.

Looking ahead, Bilicic noted that the pace of data center construction and the evolving energy mix will be critical to watch. Regulatory developments around carbon emissions and grid reliability could further shape investment flows. For instance, the Biden administration's proposed emissions standards for power plants could accelerate the shift toward renewables and natural gas with carbon capture, while state-level renewable portfolio standards may influence the location of new data centers. Traders should monitor capacity additions and corporate power purchase agreements as indicators of sustained demand. Key metrics include the backlog of data center construction permits, the volume of PPAs signed by tech companies, and the utilization rates of existing data centers. Additionally, the interplay between data center demand and other structural factors—such as the electrification of transportation and the retirement of coal plants—will determine the overall trajectory of energy prices. As Bilicic emphasized, the data center build-out is a multi-year trend that is reshaping the energy landscape, and traders who understand its nuances will be better positioned to navigate the evolving market.