Data Centers in Demand-This REIT Owns a Whole Portfolio

The technology sector is making waves again, both in the stock market and on the political spectrum. This time around, the attention has centered on the growth of data center presence inside the United States, which creates many opportunities for companies exposed to artificial intelligence, cloud computing, and semiconductors in general.

However, it also creates a more subtle earnings growth pocket in those involved with building or leasing those data centers across the country, which is where today’s stock pick comes into play. Equinix Inc. (NASDAQ: EQIX) is a real estate investment trust (REIT) that controls and leases out data centers to major customers across the country, presenting a tremendous opportunity for the coming years.

This isn't a short-term trade but a long-term investment opportunity that merits consistent addition over time. The onshoring of computing capacity and data centers in the U.S. is just beginning, and major players like NVIDIA (NASDAQ: NVDA) and Taiwan Semiconductor Manufacturing (NYSE: TSM) currently have only a small portion of the domestic presence they aim to achieve.

Why Equinix’s Scale Advantage May Unlock Future Revenue Upside

As most of the attention was focused on semiconductor names and direct players in artificial intelligence, these lateral plays have often been overlooked, which is why investors can find Equinix stock trading at only 78% of its 52-week high. This current valuation is unrelated to underlying fundamentals, but rather due to a lack of attention.

That attention is quickly shifting to data center construction and rollouts, a factor that could significantly influence how the market views a stock like Equinix in the future. With this in mind, investors should begin checking off a list now before it is too late to act on this REIT.

One of the most important metrics to watch for REITs is adjusted funds from operations (AFFO), which accounts for the unique accounting rules and benefits tied to property ownership.

On this metric, investors can see that Equinix reported up to $9.91 for its latest quarter, an 11% increase compared to the same quarter last year. The key question is how the company can achieve such growth with only 4% revenue growth. This is explained by the strong demand and expansion of data centers nationwide.

Achieving a larger scale allows Equinix to distribute its costs and terms more favorably. That expansion will eventually show in higher revenue figures when these leases can be booked as revenue. Still, for now, this AFFO growth is exactly what investors should lean on.

Wall Street Recognizes the Opportunity in EQIX

Seeing the financials grow right along the entire data center space now and into the future, Wall Street analysts had little choice but to land on a consensus Buy rating for Equinix stock, alongside a $959.9 per share price target. Although this valuation is attractive, with a 23.7% upside, the realistic upside is significantly higher.

Equinix’s 52-week high has been set at $994 per share, a level reached during the early months of 2025. However, as the year progressed, the company's focus on other technology players meant this name failed to capture the attention needed to sustain demand for its stock.

This is why investors could reasonably expect analysts to eventually start to float their valuations a bit closer to this 52-week high, especially as demand for data centers starts to roll out. If that assumption sounds too bold for investors, they can consider how the rest of the market feels about Equinix as well.

The easiest way to do this is to compare Equinix stock’s current valuation to that of its peers in the REIT industry and identify any outlier figures that warrant further examination of potential future scenarios. Equinix stock’s price-to-earnings (P/E) ratio of 76.0x is a clear outlier.

The rest of the REIT industry now trades at an average P/E of only 30.7x, making Equinix the premium name in this space. While most investors will see this as overextended and primed for a downfall, seasoned investors and traders will remind them that the market is always willing to pay up for the names it believes can outperform peers and the broader market.

In the case of Equinix, the right fundamental and financial story stands strong to justify this premium and then some, as attention comes back into data centers, investors may want to front-run the rest of the market in this fierce race.

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The article "Data Centers in Demand—This REIT Owns a Whole Portfolio" first appeared on MarketBeat.