Inside one of Equinix’s internal operations at Equinix Data Center in Ashburn, Virginia, on May 9, 2024.
Amanda Andrade-Rhoades | The Washington Post | Getty Images
The growing opposition to artificial intelligence data centers may paradoxically serve as a catalyst for real estate investment trusts (REITs) operating in this sector.
National protests have emerged as hyperscalers race to construct data centers for training and running AI models. These facilities require vast tracts of land while consuming massive quantities of electricity and water, and they generate significant noise.
This debate is anticipated to intensify heading into the midterm elections. A recent NBC News poll revealed that 69% of respondents oppose the construction of AI data centers in their local areas.
Currently, there are over 4,700 data centers across the nation, a figure expected to grow exponentially. PwC projects that annual data center spending will surge from roughly $800 billion in 2026 to $1.8 trillion by 2050. Meanwhile, several states are enacting legislation to restrict or ban new construction, and a moratorium is already in effect in New York.
Leveraging REITs for AI Exposure
While hyperscalers dominate the headlines, another avenue for capitalizing on the AI data center boom is through real estate investment trusts. These entities act as landlords, constructing, owning, and leasing space to multiple tenants—including Amazon, Apple, and Oracle—according to the National Association of Real Estate Investment Trusts, an industry group.
“Amid political and community pushback, while new projects may face delays, this environment could be beneficial for existing data center REITs, which possess pricing power driven by continuously expanding compute demand,” Mizuho analyst Vikram Malhotra noted in a September 1 report.
Data center REITs represent 13% of the total U.S. REIT market capitalization of $1.5 trillion, according to Nareit. Public REITs currently own approximately 275 data centers in the United States—less than 10% of the nation’s owner-operated and leased data centers, the group reported.
Three data center stocks comprise the FTSE Nareit Equity REITs Index: Digital Realty Trust, Equinix and Iron Mountain.
Data Center REITs
Ticker Company Div Yield YTD Performance DLR Digital Realty Trust 2.59% 23.3% EQIX Equinix 1.99% 36.9% IRM Iron Mountain 2.96% 42.0%
Source: FactSet
Equinix, which recently secured a partnership with Nvidia, is the largest company in the space with a market capitalization of roughly $102 billion. Offering a 1.99% dividend yield, the stock has climbed approximately 37% year to date. Its second-quarter adjusted funds from operations (AFFO) exceeded expectations when Equinix reported earnings and raised its full-year guidance in July.
Digital Realty Trust holds a market capitalization of $71 billion, yields 2.59%, and is up more than 23% in 2026. In July, the company reported adjusted FFO above analyst estimates and raised its full-year guidance.
Iron Mountain boasts a 2.96% dividend yield, has surged 42% this year, and commands a $34.7 billion market cap. Its second-quarter AFFO beat expectations, prompting the company to raise its full-year guidance.
A Tailwind for REITs
The resistance to data centers could act as a tailwind for REITs, though the dynamic is nuanced, according to Wells Fargo Investment Institute analyst Amanda Martinez.
On one hand, the supply-demand dynamics favor REITs, as limiting new supply could increase the value of existing capacity. She added that if new capacity becomes harder to develop, those with sizable pipelines of permitted development sites and secured power will hold a relative advantage.
“On the other hand, permitting restrictions and moratoriums could hinder future growth by slowing development timelines and increasing costs,” Martinez noted.
David Guarino, an analyst with real estate analytics firm Green Street, is bullish on both Equinix and Digital Realty.
“Their size allows them to be nimble,” he said. “If there is restriction or pushback in a specific market, they possess large land banks and extensive development pipelines, enabling them to pivot to other markets. Thus far, this has not slowed their growth story in any way.”
Furthermore, their decades of experience have cultivated strong relationships with local municipalities, he noted.
“They hold an advantage given their track record and execution capabilities, making them desirable business partners,” he said. “This helps them maintain an edge over newer entrants that may lack that expertise.”
Guarino prefers Equinix over Digital Realty, although he acknowledged that both companies are performing “incredibly well.”
“As AI inference accelerates—representing lower-latency, real-world use cases—it will benefit companies focused on smaller tenant leasing closer to population centers,” he explained. “This constitutes a much larger portion of Equinix’s business compared to Digital Realty’s.”
Alex Pettee, president and director of research and ETFs at Hoya Capital Real Estate, is also bullish on the supply and demand dynamics for data center REITs. Both Equinix and Digital Realty are included in Hoya’s model portfolios.
“Obviously, a moratorium can be detrimental if it halts one of your projects,” he said. “But zoom out, and if zoning tightens, power becomes harder to secure, and communities reject new facilities, the data centers that already exist become more valuable.”
While these stocks are not cheap compared to other REITs, they appear attractive relative to the broader AI trade, he noted.
“You are getting double-digit earnings growth, tangible real estate and infrastructure, recurring contractual revenue, and a roughly 2% to 3% dividend yield,” Pettee said.