US private equity groups have invested billions of dollars in data centers serving Baitedans by Tiktok owners.
According to four people with knowledge of arrangements, Blackstone, Bain Capital, Warburg Pincus and the Atlantic General are supporting businesses that run Malaysian data centres that count Beijing-based integration as tenants.
Some people do so without knowing whether Baitedan will use legal loopholes to access high-end NVIDIA chips to develop the possibilities of artificial intelligence.
Chinese companies have been banned from purchasing the most performant chips outside the US since 2023. However, by lending space in Malaysia, which includes chips owned by third-party companies, we have been able to legally secure access to them. .
The loophole is scheduled to close in May due to rules prohibiting access to China as well as possessing such advanced US technology.
The rules were issued just before Joe Biden’s administration resigned from office.
“If you want to build a data center using NVIDIA (chip) in Malaysia. . You must meet these types of security requirements, including not allowing training of large language models on these datasets. ”, Alan Estevez, secretary to the Department of Industry and Security at the time, told the Financial Times. Just before he left his role last month.
The type of chip used in the data center is unknown and private equity groups don’t always know because the data center companies don’t own the chips or rent them to clients.
However, several people with knowledge of the issue have communicated to FT their plans to use Malaysian data centres to access high-end NVIDIA chips.
The acquisition group tends to take the view that it “provides buildings with electricity and cooling systems.” What you have on your servers and servers is not your business,” said the private equity executive.
In recent years, Bytedance has increased its data centers outside China, particularly in Malaysia, as it becomes an important player in China’s AI races. We are planning a large order this year to boost AI capabilities overseas, including rental agreements reported last month by FT. Separately, the Atlantic General is investing in itself.
Matt Rabinowitz, a partner at the law firm Pillsbury, said:
Under the new rules, both the owner and operator of the chip used in the data center must go through a review process to ensure compliance.
It is not clear whether US President Donald Trump, who tightened his actions against China in his first term, will further change regulations governing chip exports and their use.
The rules set to take effect in May are to reduce demand for data centers, and if Baitedan and other Chinese groups cannot use them to ensure access to the best NVIDIA chips, they will be able to reduce the demand for buy-in groups. The industry said it is working on the value of the investment, the advisors said.
But high demand for data centers around the world could fill the gap, they added.
Global Private Equity Group is attracted by the increased internet use and the possibility of exposure to the AI boom despite slowing other trading activities.
They tried to distance themselves from the complex and politically challenging chip supply businesses by backing companies that run physical data center buildings but do not own internal chips.
“There is no visibility or impact on the servers and equipment you install in your data center,” said Princeton Digital Group, a data center operator supported by Warburg Pincus.
Bain said its portfolio companies have no access to servers within the data centers they run and “complies with relevant laws and regulations in all jurisdictions operated by us.” Blackstone and the Atlantic General declined to comment.
Baitedan is an anchor tenant of a data centre in Johor, a southern state in Malaysia, and is owned by a unit of Bayne Capital portfolio company Wintrix. He is also a tenant of several other facilities in Johor. This includes those owned by Blackstone Airtrunk, PDG and Epoch Digital.
The ordinance is expected to spend more than $12 billion on AI infrastructure this year, of which $6.8 billion is allocated for investments outside of China. However, US rules can complicate that investment.
“The ordinance complies with all applicable laws and regulations,” the company told FT.
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Warburg Pincus agreed to an investment of up to $300 million in PDG in 2017, and then injected more funds. Blackstone completed the $24 billion ($15 billion) acquisition of Sydney-based Airtrunk in December, with sites in Malaysia, Singapore, Hong Kong, Australia and Japan.
Bain purchased China’s Chindata in 2019, merged with Bridge Data Centers, and listed the total company in 2020 on Nasdaq. The total company now known as Wintrix became private in 2023 at a $3 billion valuation.
The Atlantic General completed his purchase of ACTIS last year.
