Flexential CEO Chris Downie is excited about the hyperscale AI boom—but not for the reasons you would expect.

While many of his competitors chase hyperscale data center projects to cater to giants like Amazon and Microsoft, Downie sees their shift in strategy as his company’s gain. By focusing on enterprise customers now overlooked by hyperscale aspirants, Flexential is doubling down on a market segment poised for continued growth—and, according to Downie, higher returns.

“We’re not distracted by hyperscale AI,” Downie said in an interview, noting that the enterprise demand driving data center growth for decades remains as strong as ever. “ I’m pleased that a lot of my competitors have pivoted to building for AI, because they will not touch a 4.5 MW requirement or a 2 MW requirement, which means that I have the opportunity to gain more market share in that product category than I ever have in the past.”

Better yield

For Downie, that market share expansion comes with the kind of returns Flexential’s investors expect—returns that outpace those of hyperscale facilities. While hyperscale data centers are geared to deliver annual returns in the 8% to 10% range, Flexential’s model targets returns in the mid-teens.

“Hyperscalers, given they’re so big, command the best price in the market for what’s delivered,” he said.

In contrast, Flexential’s multi-tenant model serves over 2,500 customers across industries like healthcare, finance, and manufacturing, and comes with a backplane of capabilities.

“ Ultimately, we charge a higher price,” he said. “And thus, even though we have some incremental cost, we can get a better yield than the hyperscale model now.”

Infrastructure investors may ascribe more risk to that multi-tenant model versus a hyperscale backer, where there’s little to no risk, but Flexential’s investors at GI Partners and Morgan Stanley Infrastructure Partners are “comfortable with the durability of the annuity,” Downie said.

He added: “We have more customers. Many stay forever. Some leave. We replace them.”

Flexential has been backed by private equity firm GI Partners since 2014, while MSIP in October acquired a 30% stake in the company, contributing both primary and secondary capital. The primary capital provided fresh funds to support new projects, while the secondary capital allowed MSIP to buy the stake from GI. Downie declined to disclose how much primary and secondary capital were included as part of the deal.

Flexential also utilizes an asset-backed securities (ABS) vehicle for its stabilized facilities. Once construction is complete and the space is leased, facilities are appraised by Newmark—typically at values higher than their construction costs—and rolled into the ABS vehicle. This process reimburses 65% to 75% of the appraised value, allowing the company to reinvest capital in new developments. Downie likened this system to a “conveyor belt,” ensuring continuous project funding.

Project pipeline

Flexential’s project pipeline includes 110 MW of capacity currently under development. The company is prioritizing seven key markets, including Hillsboro, Atlanta, Denver, and Salt Lake City, where demand for data center capacity is highest. Downie aims to build 36 MW data centers in each of these locations as soon as feasible, with plans to expand further over time.

Each 36 MW facility comes with a price tag of approximately USD 360m, or USD 10m per megawatt, covering everything from the powered shell to turnkey systems. The infrastructure added by customers—often high-performance GPUs and other technologies—can cost up to five times more per megawatt than the facility itself. Downie views this as a competitive advantage. “Once a customer invests in infrastructure that significant, they’re unlikely to leave, even for those that are deploying it on a smaller scale,” he said.

Flexential’s ability to engage in project finance activity is currently limited by a development revolver put in place three years ago. The revolver, which is fully utilized, includes a “make whole” provision that prevents Flexential from refinancing the facility without paying up. The provision expires at the end of the year, at which point Flexential plans to refinance the revolver and begin using asset-level, project-based financing to fund new developments.

‘Shiny object’

Despite the industry buzz surrounding GPUs and AI-driven workloads, Downie underscored the enduring importance of CPUs in the enterprise data center landscape. He dismissed the notion that GPU technology will displace traditional CPU infrastructure, pointing out that enterprise workloads have relied on CPUs for decades and will continue to do so.

“AI is the shiny object everyone’s focused on,” Downie said. “But there’s trillions of dollars invested in CPU infrastructure, and it’s perfectly fine for the enterprise applications running on it today,” he said, noting that CPUs are still advancing technologically.

Flexential’s geographically diverse footprint—covering NFL cities like Denver, Nashville, and Atlanta—positions the company to meet latency-sensitive demands. And Flexential’s customer base spans industries and includes a mix of enterprise clients and high-profile technology firms — including those in the AI industry.

Downie highlighted CoreWeave, a prominent AI infrastructure provider, as a key partner. Flexential recently deployed 9 MW for CoreWeave within a 36 MW environment, a deal that reflects its growing involvement in the AI sector. Additional customers include Applied Digital, a public company with deployments in five Flexential locations, and enterprise clients like Workday, Salesforce, Dropbox, CrowdStrike, and Cloudflare.

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