BTIG Initiates DLR, Equinix at Buy, Citing AI-Driven 'Supercycle' in Data Centers

BTIG initiated coverage of data center operators Digital Realty Trust (DLR) and Equinix (EQIX) with Buy ratings on Friday, arguing that surging demand from artificial intelligence has created a “multi-decade supercycle” for the sector. The investment firm set a $215 price target on Digital Realty and a $1,210 target on Equinix.

A Secular Demand Shift

In a note to clients, BTIG analyst Thomas Catherwood argued that the most critical distinction for real estate investors is whether demand is cyclical or secular. He placed data centers firmly in the secular camp, comparing the current environment to the paradigm shift industrial real estate experienced during the e-commerce boom of the mid-2010s.

According to the note, massive AI investment is driving higher facility utilization, significant rent growth, and record development activity across the data center industry.

Unprecedented Growth and Investment

BTIG identified record capital expenditure from hyperscale cloud providers as the primary demand driver, projecting it will exceed $650 billion in 2026, a 72% year-over-year increase. This intense demand has already had a significant market impact:

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• Data center rents have increased by 63% over the past five years.
• New developments are projected to increase global supply by 86% through 2030.
• The estimated total cost for this expansion is $5.1 trillion.

Supply Unlikely to Outpace Demand

Despite the record construction pipeline, BTIG believes a typical cyclical supply glut is unlikely. The firm cited significant constraints that will moderate the pace of new development, including limited power availability, long lead times for physical components, and extremely high capital requirements.

Citing data from Rystad Energy, the note stated that current demand could theoretically support 376 gigawatts of data center development—more than three times the current global capacity—if power and capital were more accessible. In this environment, BTIG said it favors operators with proven track records, operational expertise, and a concentration in core markets.