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Data Center Battle: Why Digital Realty Just Became The Top Pick

Benzinga · 1d ago

Data center operators have an attractive runway for growth, "supported by elevated AI infrastructure spending and continued cloud migration," Goldman Sachs analyst Michael Ng said in a note.

Coverage Initiated: The analyst began coverage of:

  • Digital Realty Trust Inc (NYSE:DLR) with a Buy rating and price target of $188.
  • Equinix Inc (NASDAQ:EQIX) with a Neutral rating and price target of $785.
  • IREN Ltd (NASDAQ:IREN) with a Neutral rating and price target of $39.

Check out other analyst stock ratings.

The Data Center Thesis: WhileDigital Realty Trust and Equinixare mainly colocation providers that generate revenue by leasing their data center properties, IREN is a crypto miner trying to make a pivot to AI cloud services, Ng said in the note.

Digital Realty is likely to see "an extended period of revenue and profit growth, "supported by an extensive backlog, wide releasing spreads that are indicative of pricing opportunities, and $6.4 bn (730 MW) of data center construction under development, including DLR’s share of its joint ventures coming online in 2026," the analyst wrote. He added that Digital Realty is expected to generate an 11% revenue CAGR and 12% EBITDA CAGR between 2026 and 2029.

While Equinix should benefit from AI spend, given its leadership position, the near-to-mid-term AI infrastructure investments are likely to be focused on model training, which might be supported by a large-scale wholesale colocation operator, Ng said.

IREN is in "hyper growth," mode, with revenues expected to grow from $501 million in 2025 to $3.8 billion in 2028, with EBITDA expanding from $270 million to $2.7 billion over the same period, the analyst stated. This growth is underpinned by IREN’s data center deal with Microsoft Corp (NASDAQ:MSFT), he added.

DLR, EQIX, IREN Price Action: Shares of Digital Realty Trust, Equinix and IREN had risen by 1.19% to $150.15, by 0.22% to $749.50 and by 5.50% to $35.52, respectively, at the time of publication on Thursday.

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