AI Infrastructure Spending Set to Soar Past $500 Billion, Spotlighting Data Center Giant Equinix
Global spending on artificial intelligence infrastructure is projected to more than double this year, surpassing half a trillion dollars, according to fresh analysis from Goldman Sachs (NYSE: GS) and FactSet. This staggering surge, up from an estimated $237 billion in 2024, underscores the breakneck pace at which tech giants are building out the computational foundations for the AI era—a trend expected to accelerate for years to come.
For investors navigating this capital-intensive landscape, direct bets on chipmakers or software firms carry significant volatility. An alternative, lower-beta approach lies in the real estate that houses this digital revolution: data centers. Among them, Equinix (NASDAQ: EQIX), one of the world's largest data center real estate investment trusts (REITs), presents a compelling case as a foundational play with reliable income.
Equinix operates a global network of more than 270 data centers across 36 countries, serving over 10,000 customers, including a majority of the Fortune 500. Its strategic value extends beyond mere square footage; its "Fabric" ecosystem facilitates nearly half a million direct interconnections between businesses and cloud providers, a network it claims is larger than its next ten competitors combined. This interconnectedness, coupled with a flexible infrastructure designed to serve everything from hyperscalers to small enterprises, positions it as a critical utility in the digital economy.
As a REIT, Equinix is structured to pass on income to shareholders. It is required to distribute at least 90% of its taxable income as dividends, which has resulted in a consistent and growing payout since its REIT conversion a decade ago. Financially, its adjusted funds from operations (AFFO)—a key REIT profitability metric—has grown at a compound annual rate of about 9% from 2020 to 2024. Management forecasts further growth of 8%-11% for 2025, which comfortably covers its forward dividend. At recent prices, the stock offers a yield near 2.3% and trades at a multiple that many analysts consider reasonable for its steady growth profile.
"Equinix isn't the flashiest name in AI, but it's the plumbing," says Michael Chen, a portfolio manager at Horizon Capital. "When every major company needs more AI capacity, they need a place to plug in. Equinix provides that neutral, global hub. It's a toll-road business on the information superhighway."
However, not all observers are convinced. Sarah Jennings, an independent tech analyst, offers a more critical take: "Let's not get carried away. A 2.3% yield is hardly exciting in a higher-rate environment, and the stock has been range-bound for years. This 'safe play' narrative ignores the massive capex burden and rising competition they face. Investors chasing AI hype here might be better off looking elsewhere for real growth."
Contrasting that view is David Park, a long-time income investor: "I've held EQIX for the dividend growth and sleep-easy factor. The AI boom is a massive, multi-year tailwind for data demand. Equinix isn't trying to pick AI winners; it's renting space to all of them. That's a business model with resilience."
While Equinix may lack the explosive potential of a pure-play AI chip stock, its role as essential infrastructure, combined with its dividend mandate and global scale, makes it a candidate for investors seeking a more measured entry point into the AI expansion. The anticipated shift to a lower interest rate environment could also provide a further catalyst, making yield-oriented equities like REITs relatively more attractive.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equinix, Goldman Sachs Group, and Nvidia. The Motley Fool has a disclosure policy.
AI Infrastructure Spending Set to Soar Past $500 Billion, Spotlighting Data Center Giant Equinix was originally published by The Motley Fool