Mizuho Analyst on AI Data Center Boom and 2026 Bubble Fears

AI Data Center Investment Debate

• 💡 The AI data center boom is a highly debated real estate investment theme heading into 2026, with tech giants investing heavily in technology upgrades.
• 🧠 There's an ongoing bull-bear debate regarding the sustainability of this growth, with fears of an AI bubble emerging.
• 📈 The outcome for 2026 hinges on whether spending rationalization occurs or if the fears are unfounded, leading back to investing in gigawatt-scale data centers.

Digital Realty's Performance and Catalysts

• 🎯 Digital Realty was a top pick last year but is down 12%, with bulls focusing on a significant bookings number for AI compute as a key catalyst.
• ☁️ Winning enterprise contracts in the cloud is another factor that could help earnings, especially if they are shorter duration.
• 🚀 If earnings trajectory can increase to high single digits, Digital Realty may shift from being viewed solely as an AI hyperscaler play to one with multi-year double-digit earnings growth.

Equinix's AI Beneficiary Potential

• ⚡ Equinix is seen as a potential beneficiary of AI inference, even though it's not traditionally viewed as a hyperscaler play.
• 📉 In a bare-case scenario of an AI bubble, Equinix's business, 95% tied to traditional cloud, might see multiple impacts but limited cash flow effects.
• 🏙️ In a bull case, Equinix is well-positioned to capitalize on inference trends, potentially shifting from massive data centers to smaller ones closer to cities.