BTIG opened coverage of two major data center operators, Digital Realty Trust and Equinix, assigning Buy ratings and laying out a thesis that demand tied to artificial intelligence is shifting the sector from cyclical behavior to secular growth.
Analyst Thomas Catherwood framed the central analytical distinction for real estate investors as whether demand patterns are cyclical or secular. In BTIG's view, data centers fall into the secular category as AI investment lifts facility utilization, supports rent gains and fuels development activity at an unusually large scale.
BTIG published price targets of $215 for Digital Realty and $1,210 for Equinix. The note identifies projected hyperscaler capital expenditures of more than $650 billion in 2026 - a 72% increase year-on-year - as the primary engine behind elevated demand for data center capacity.
Several metrics cited by BTIG underpin the bullish outlook. Data center rents have climbed 63% over the last five years, and new construction activity is expected to expand global supply by 86% through 2030 at an estimated aggregate cost of $5.1 trillion. At the same time, independent estimates referenced in the note suggest current demand levels could support the development of 376 gigawatts of data center capacity - more than three times the sector's present footprint - if power and capital were unconstrained.
Despite the unprecedented construction pipeline, BTIG cautioned that certain constraints reduce the likelihood of a typical cyclical overshoot. The firm pointed to limits on power availability, long lead times for physical components and the high capital intensity of new facilities as factors that could restrain supply growth relative to demand.
BTIG also said it favors operators that demonstrate a combination of proven operating records, strong operational capabilities, flexible capital structures and concentration in core markets as the sector attracts capital at scale.
Key points
- BTIG initiated Buy ratings on Digital Realty (price target $215) and Equinix (price target $1,210).
- Projected hyperscaler capital expenditures of over $650 billion in 2026 - up 72% year-on-year - are cited as the main demand driver.
- Data center rents have increased 63% over five years, while planned development could raise supply by 86% through 2030 at an estimated $5.1 trillion cost.
Sectors impacted
- Data center real estate and REITs
- Cloud and hyperscaler infrastructure spending
- Energy and power delivery markets supporting large computing facilities
Risks and uncertainties
- Power availability - constraints on grid capacity or access to power could limit the pace of new data center builds and affect operators and utilities.
- Component lead times and capital intensity - long procurement cycles and high upfront costs could slow development and influence returns for real estate investors.
- Construction pipeline - while large in scale, the record development activity could still face execution challenges that introduce uncertainty for supply-demand balances in the sector.
BTIG's assessment places data centers in a prolonged growth phase driven by AI-related demand, but it also acknowledges supply-side frictions that could temper how quickly new capacity comes online. The firm's preferences favor operators with demonstrated operational expertise and financial flexibility as capital pours into the sector.