The Artificial Intelligence (AI) market is booming, and data centers are poised to cash in on this trend, according to Bank of America. As the demand for data continues to grow, more data centers are needed to store and process that data. This presents a lucrative opportunity for data center Real Estate Investment Trusts (REITs) to profit from the AI explosion.
There are two core elements to creating a generative AI program: training and inference. Training involves a model learning from a large dataset, while inference is the result of that training, where the AI model answers questions about the data set. Both training and inference require large amounts of data, storage, and computing power, increasing the demand for data centers worldwide.
Data center vacancies are reaching record lows, and prices for new leases are rising as a result of the surge in demand. AI’s growth will only intensify this dynamic, creating even more demand for data center space. The question now is which data center providers make the best investments in this AI-driven market.
Bank of America analyst David Barden believes that Digital Realty Trust (DLR) and Equinix (EQIX) are the top data center REITs poised for success. DLR, with its larger-scale wholesale deployments, is well-positioned to profit from the need to train AI models. On the other hand, EQIX has the infrastructure necessary to handle increased demand for AI capabilities, particularly in the area of inference.
While both companies have their unique strengths, they stand to benefit greatly from the continued growth of the AI market. DLR’s capacity makes it ideal for larger, longer-term AI training model environments, whereas EQIX is better suited for smaller enterprise customers looking to implement AI inference-related functionality. As the demand for AI continues to rise, these data center giants are ready to capitalize on the opportunity.
So, are data center REITs the hidden gems in AI investing? With the AI market projected to reach $900 billion by 2026, the potential for profits is enormous. As an investor, it’s worth considering the role of data centers in the AI ecosystem and the opportunities they present. What are your thoughts on this AI-driven investment strategy? Share your comments below and join the discussion.
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