With the buzz surrounding artificial intelligence, many of the obvious plays like Nvidia and Microsoft are now well extended from entries. But data center stocks offer an alternative way to tackle the opportunity, with the likes of Iron Mountain and Equinix near buy points.
The data center REIT space could be a lucrative way to play the trend, according to Hoya Capital, which describes them as the "physical epicenter of AI."
"Among the top-performing property sectors this year, the data center REIT rebound has been fueled by reports of 'booming' demand for artificial intelligence focused data center chips," the firm said in a report. "Even before the Nvidia report, data center REITs were on the upswing this year after earnings results showed improved pricing power and record-high occupancy rates."
Data centers provide computing resources and storage that help to process massive data sets for artificial intelligence purposes.
According to Hoya, AI-accelerated demand should bring "sustained pricing power" to a sector it says has long been burdened by near-unlimited supply.
Iron Mountain Stock
Iron Mountain is near a flat base buy point of 56.53, according to MarketSmith analysis. This is a first- stage pattern, a positive.
Iron Mountain made its name in physical records storage and has transitioned into the data center space. It now has 21 operating data centers across 19 global markets.
Overall performance is strong, with the firm holding an IBD Composite Rating of 93. Since the start of 2023 IRM stock is up about 14%. Its EPS Rating comes in at 83 out of 99.
The stock pays a quarterly dividend of 62 cents a share, for an annualized yield of 4.4%. This is better than the S&P 500 average yield of 1.57%.
Iron Mountain has already built up a background in the AI space, such as its work with Google parent Alphabet to provide customers with AI insights into scanned documents.
Equinix Stock
Equinix stock is sitting near a cup base entry of 762.51. This is also a first-stage base.
EQIX also currently sits clear of its 50-day moving average. It is in the top 20% of stocks in terms of price performance over the past 12 months. Since the start of 2023 it has gained more than 14%.
Equinix is the world's largest data center operator. It is activate in the Americas, Europe, the Middle East, and Asia-Pacific region. The firm has 248 data centers worldwide.
According to Morningstar analyst Matthew Dolgin, Equinix and rival Digital Realty are "head and shoulders ahead of any other company in their size and breadth."
"The Internet of Things, artificial intelligence, and other innovations that increase public demand for data and connectivity require more hardware and connections in Equinix's highly-connected data centers," he said in a May 30 research note.
EQIX currently holds an IBD Composite Rating of 89. Big Money has been a net buyer of the stock recently, with its Accumulation/Distribution Rating coming in at B.
Equinix stock has a dividend yield of 1.8%.
Artificial Intelligence News And AI Stocks To Watch
Other REIT AI Stocks
While these are two of the stronger looking prospects, some other names are also near entries.
Digital Realty Trust has broken a downtrend and sits below a cup-with-handle entry of 108.85. While it offers a 4.7% yield, its Composite Rating of 49 is far from ideal. In addition, earnings are seen plunging 81% this year.
DigitalBridge is forming a cup base with a 16.45 buy point. But the company is expected to lose 64 cents per share in 2023. It holds a poor Composite Rating of 23.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
