Is There a Massive Opportunity Ahead for Digital Realty Trust Stock?

AI stocks and cryptocurrency miners that are pivoting their hardware into AI data centers are hot on Wall Street right now, but it seems like Digital Realty Trust (NYSE: DLR) has missed out on the rally. The stock has underperformed the S&P 500 over the past five years and is still down year to date.

That weak performance may seem shocking since this real estate investment trust (REIT) owns more than 300 data centers and serves over 5,000 customers, including some notable names in big tech. Digital Realty Trust has a compelling opportunity, but there are some key nuances that explain why it hasn't soared like other data center stocks.

Not all data centers are created equal

Image source: Getty Images

Although Digital Realty Trust has far more data centers in its portfolio than peers such as IREN (NASDAQ: IREN) and Cipher Mining (NASDAQ: CIFR), it's important to remember that not all data centers are created equal.

Digital Realty Trust's data centers were built for more general uses such as web hosting, cloud computing, and data storage. While those assets have helped the REIT produce high cash flows and maintain a respectable yield -- it's currently around 3% -- they aren't AI data centers. Regular data centers that are not heavily equipped with AI-accelerators like Nvidia's GPUs or Broadcom's application-specific integrated circuits can't handle the workloads generated by training and running AI tools.

That's why some companies specializing in AI data centers instead of general data centers have outperformed the S&P 500 this year. AI data centers are the ones that have been getting the multiyear, multibillion-dollar contracts.

Digital Realty Trust's customer base is a massive advantage

Digital Realty Trust is investing heavily to catch up with the trend: It's retrofitting some of its data centers to support AI workloads -- a process that can take up to 18 months -- and it's also building AI data centers from the ground up. The REIT is behind IREN and Cipher Mining in capitalizing on AI, but it has more properties and a larger customer base.

Those two advantages don't matter much today, but they could become huge catalysts in two or three years, when Digital Realty Trust will have numerous AI data centers up and running. Then, it will be well positioned to reach new deals with some of its existing customers.

Digital Realty Trust has worked with tech giants for many years, while IREN and Cipher Mining are just starting to develop business relationships with them. The REIT's star-studded customer roster already includes Microsoft, Alphabet, Meta Platforms, Amazon, and Nvidia.

It's easier to get excited about Digital Realty Trust stock if you think about how many AI data centers it will have in 2030 compared to how many it has now. The company already has great relationships with the biggest AI spenders, and the shift to AI could boost its cash flow.

Is Digital Realty Trust stock a buy at current levels?

Digital Realty Trust is a "show me" stock that could be a good buying opportunity today if you zoom out to consider what its business is likely to look like in 2030 or 2035. By that time, the REIT should have numerous AI data centers catering to both big tech players and smaller customers.

Multibillion-dollar deals have been flying around among AI data center providers. Considering Digital Realty Trust brought in $1.6 billion in revenue in the third quarter, it's easy to understand how securing a bunch of long-term multibillion-dollar deals could boost the stock in the long run.

The best-case scenario for the REIT would be exponential revenue growth once it has enough AI data centers to support such contracts. In the meantime, its 3% yield offers investors a steady return as they wait for that long-term thesis to unfold. However, growth investors who are on the hunt for investments that already have that sort of momentum may want to consider former crypto miners that have made the pivot to the AI data center business.

As an investment, Digital Realty Trust carries less risk than the high-flying AI data center operators that will need to continue making deals to justify their valuations. Investors who see the appeal of a relatively stable AI company that could rapidly soar within a few years may want to have Digital Realty Trust stock on their radar.

Marc Guberti has positions in Cipher Mining and Iren. The Motley Fool has positions in and recommends Alphabet, Amazon, Digital Realty Trust, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.