These ‘underappreciated winners of AI’ also pay solid income
Artificial intelligence is front and center in investors’ minds, but they may be overlooking a hot play that can take advantage of the technology’s growth — and it pays income. Data center real estate investment trusts are companies that own and manage facilities that house information-technology infrastructure. They are expected to greatly benefit as AI demand ramps up. “The data center REITs are underappreciated winners of AI, because they work in the back end,” said Tejas Dessai, director of thematic research for Global X ETFs, which manages the Data Center & Digital Infrastructure ETF (DTCR) . He calls them the “toll booths” of the AI economy. “Every single interaction that users have with AI, every single interaction that software and workflows and agents and robots and what have you will have with AI, will pass through these data centers,” Dessai said. Wells Fargo Investment Institute is among those on Wall Street bullish on the market. In a note on Tuesday, analyst John Sheehan pointed out the “unprecedented demand” the data center REITs have experienced. “We believe it possesses durable growth prospects, attractive margins, and solid pricing powers,” he said of the subsector. Sheehan also views it “as an attractive route for gaining exposure to the AI theme within the Real Estate sector, particularly as AI use cases continue to expand and support sustained demand and pricing power.” Up nearly 40% year to date Not surprisingly, the data center REITs are the best performers in the sector, up nearly 40% year to date, as of April 30, according to industry group Nareit . There are currently just three data center REITs on the FTSE Nareit U.S. Real Estate Index Series: Equinix , Digital Realty Trust and Iron Mountain , which recently pivoted from paper storage to data centers. Blackstone Digital Infrastructure Trust became the latest name to join the ranks of publicly traded data center REITs, debuting on the New York Stock Exchange last week. “I would expect that, over time, we’ll see other private portfolios of data centers come to the public markets, because the ability to raise capital, issue debt in the public debt market, it’s a huge advantage for the listed REITs,” said John Worth, executive vice president for research and investor outreach at Nareit. “The scope of what needs to be built in this industry, I think, goes far beyond what you can do in private markets.” Solid foundation for AI to build upon Data center REITs have a very specific role: to bring a facility online, operate it for the length of the contract, and collect rent and income, said Global X’s Dessai. The companies also aren’t dependent on AI for their business since, as a whole, they already operate about 600 data centers around the world that are nearly fully occupied with rent-paying tenants. “You’re getting stabilized properties mostly driven by traditional data center activities — enterprise digitization, cloud services, but with the ability to do development on top of that that can be AI-driven,” said Nareit’s Worth. He also expects them to participate less in the hyperscale training of models, but more in the inference, or use of AI after it has been trained. “That’s where things like latency and location and interconnection really become critical,” Worth added. “And those are the strengths of the data center REIT portfolios.” The stocks Equinix has a 1.9% dividend yield. The company operates more than 280 data centers across the globe. The stock has an average analyst rating of buy and nearly 14% upside to the average price target, according to FactSet. EQIX YTD mountain Equinix year to date Among those bullish on Equinix is Raymond James, which upgraded the stock to strong buy from market perform on April 30. “Equinix remains the global data center leader as its product complexity and diversification remain unique in the industry, with unparalleled global scale and network density, which we view as two of the biggest moats around the data center business,” analyst Frank Louthan said in a note to clients. Shares have jumped 38% year to date. Digital Realty Trust, which boasts a 2.5% yield, has an average analyst rating of overweight and almost 16% upside to the average price target, per FactSet. The company operates more than 300 data centers. DLR YTD mountain Digital Realty Trust year to date Goldman Sachs is among those who rate the stock a buy. “We believe Digital Realty is well positioned to benefit from the supply/demand tightness in the datacenter industry, which we think will persist for longer than the street expects,” analyst James Schneider said in an April 22 note. Digital Realty Trust has gained almost 22% so far in 2026. Lastly, Iron Mountain, which yields 2.7%, has more than 25 global data center locations. The stock also has an average rating of overweight and about 5% upside to average price target, per FactSet. Shares have rallied more than 50% year to date. IRM YTD mountain Iron Mountain year to date Those who want a more diversified play on data centers can buy an exchange-traded fund. The Global X Data Center & Digital Infrastructure ETF, which has gained 40% so far this year, is rated five stars by Morningstar. The fund gives investors pure play exposure to companies in the broader data center ecosystem, Dessai said. About 57% of the ETF’s holdings are in real estate, which are largely REITs.
