Recent warnings about a potential slowdown in AI development have affected stocks of major data center REITs like Digital Realty and Equinix. Despite this, Digital Realty's CEO Andrew Power emphasized that the demand for data centers is still robust, driven by ongoing digital transformation and cloud computing growth.
A report from McKinsey predicts that AI could account for 70% of global data center capacity demand by 2030, necessitating nearly $7 trillion in capital investment, with $3 trillion expected in real estate over the next five years according to JLL.
Power noted that while AI advancements may influence the allocation of resources, the overall demand for data centers remains strong, particularly in key markets like Northern Virginia and Dallas, where demand has outpaced supply for years.
Analysts, including Andrew Batson from JLL, agree that the real growth in data centers will come from the adoption of AI tools in daily workflows, rather than the immediate development of new AI models. Institutional investors like Blackstone and BlackRock continue to show confidence in the sector, indicating a strong outlook despite current market fluctuations.
Digital Realty is also well-prepared for potential challenges, with a $20 billion development pipeline and a strong balance sheet, positioning the company favorably for future growth