Switch eyes $80B IPO, a 7x return in 3 years

Key Takeaways

• Switch is preparing an IPO that could value the company at $80 billion including debt, up from $11 billion when it went private in 2022
• Goldman Sachs and JPMorgan are leading underwriting, with a potential $10 billion raise as soon as Q4
• The listing reflects surging investor appetite for AI infrastructure plays, joining a pipeline that includes potential debuts from SpaceX, Anthropic, and OpenAI

Switch, the Las Vegas-based data center operator, has hired Goldman Sachs and JPMorgan Chase to lead an initial public offering that could raise up to $10 billion and value the company at close to $80 billion including debt. That figure represents roughly a 7x increase from the $11 billion DigitalBridge and IFM Investors paid to take Switch private just three years ago.

The IPO could happen as soon as the fourth quarter, according to sources familiar with the matter who spoke to Reuters. Size, timing, and valuation remain under discussion. If it proceeds at that scale, it would rank among the largest U.S. stock market debuts in recent years.

Why a data center company is worth $80 billion

Switch operates large-scale data center campuses that provide the power, cooling, and connectivity needed to support AI computing. Its customers include Nvidia, Dell Technologies, and FedEx. The company's facilities allow cloud providers and enterprises to deploy energy-intensive GPU clusters used for training and running AI models.

The valuation jump tells a straightforward story: AI models need compute, compute needs data centers, and data centers need massive capital investment and operational expertise to run. Switch's campuses are among the largest in the world, and founder Rob Roy has emphasized scale as the company's differentiator. He has previously described the approach as building "data center campuses, not data centers."

One feature that may appeal to tech companies with sustainability targets: Switch's data centers have been powered by renewable energy since 2016. That matters when your customers face pressure to decarbonize their AI workloads.

Where this fits in the 2024 IPO pipeline

The U.S. IPO market has snapped back to life. Proceeds have totaled $155.5 billion so far this year, the strongest pace since 2021, according to Dealogic data. The pipeline is heavy on AI and infrastructure plays: SpaceX, potential debuts from Anthropic and OpenAI, SoftBank-backed SB Energy, and Brookfield-backed Csquare, which is targeting a valuation up to $4.18 billion.

AI chipmaker Cerebras Systems surged after its May debut, raising $5.55 billion. That reception validated investor appetite for companies that sit upstream of AI model deployment.

Switch has also held discussions with private investors about raising capital at a valuation of at least $40 billion ahead of the IPO, suggesting the company is testing demand across both public and private markets.

The DigitalBridge playbook

Switch originally went public in 2017. DigitalBridge Group, a digital infrastructure investment firm, teamed with Australian fund IFM Investors to take it private in 2022 for $11 billion. Australian pension fund Aware Super bought a minority stake from Switch's owners in 2023.

A $80 billion exit, if achieved, would represent a remarkable return on a three-year hold. It would also validate the thesis that private equity can extract value from infrastructure assets by positioning them for the AI wave, then returning to public markets at a premium.

DigitalBridge has been active in digital infrastructure. The firm's portfolio includes a range of data center, tower, and fiber assets. The Switch IPO, if successful, would be its most significant exit to date.

What could change

The sources cautioned that size, timing, and valuation remain under discussion and could still change. IPO plans can slip for any number of reasons: market volatility, regulatory complications, or simply a mismatch between seller expectations and buyer appetite.

The $80 billion figure includes debt, which inflates the enterprise value compared to a pure equity valuation. Investors will scrutinize Switch's leverage and whether the company's growth trajectory justifies the premium.

Goldman Sachs and JPMorgan declined to comment. Switch did not respond to requests for comment.

Frequently Asked Questions

What is Switch's current valuation?

Switch's IPO could value the company at close to $80 billion including debt, according to sources familiar with the matter. This is up from the $11 billion DigitalBridge and IFM Investors paid to take it private in 2022.

When will Switch go public?

The IPO could happen as soon as the fourth quarter of 2024 or early 2025, though timing remains under discussion and could change.

Who are Switch's major customers?

Switch's data center customers include Nvidia, Dell Technologies, and FedEx, among other enterprises and cloud providers deploying AI workloads.

Which banks are leading the Switch IPO?

Goldman Sachs and JPMorgan Chase have been tapped as lead underwriters for the offering.

Is Switch powered by renewable energy?

Yes, Switch's data centers have been powered by renewable energy since 2016, which may appeal to technology companies with decarbonization targets.

Source: Tech-Economic Times / ET