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Well it needs to exist in some form that this universe can understand. The universe's most basic form is either energy or particles, at least what we know of.
What I've always thought the Data Entities were, was that they are an organised sentient set of waveforms, they can just shift the waveform to become either energy or particles, thus able to create anything.
Yuki and the Data Entity refers everything in the universe as data. Because that word, data, means any form of knowledge, anything that can be perceived.
The Data Entities view the universe in just a single medium, waves, meaning everything is fundamentally the same because everything is a waveform at the most minute scale, everything is just data to them.
Data = waveform, so Data Entities = waveform entities to me.
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