This AI infrastructure giant is hiding in plain sight

On Monday, I wrote about Iron Mountain (IRM), a real estate investment trust (REIT) that’s really quite unique.

Its main service is renting out shelf space to corporations and government agencies that need to store their piles of paper documentation somewhere safe. And, for the record, that’s big business.

But so are the data centers Iron Mountain has been investing in since 2013 that now account for about 13% of its consolidated revenue. As I wrote on Monday, people are talking about the REIT because of those assets.

You’re more than welcome to read the whole article if you haven’t already. But long story short, the stock is trading at more than 54x earnings compared to its normal valuation around 30x. And, quite simply, my team and I don’t believe in overpaying for quality.

As I also wrote, “That’s a recipe for stagnant growth or – at Iron Mountain’s current price point – even significant losses that could take years to recover.”

With that said, it’s no secret that the artificial intelligence (AI) trade has been exceptionally lucrative since 2022 – even if exactly who’s making money from it has shifted more recently. (That’s a topic Nick Ward covered last Friday).

So, as promised, I’ve picked out another data center play that’s trading at a much more affordable price. There’s a lot to admire about American Tower (AMT) – no matter what its current detractors say.

When most investors think about AI, they immediately think about Nvidia (NVDA), hyperscalers, or pure-play data center REITs. Even at its current high, Iron Mountain with its small but growing number of data centers is an afterthought.

In which case, the vast communications network that connects all this digital capacity isn’t even on most people’s radar. And I understand why. It’s easy to take our phones, laptops, tablets, and other connected devices for granted…

Until they stop working.

Like when 1.5 million Verizon (VZ) customers lost service back in January during a nationwide outage. Or how, two years earlier, AT&T (T) experienced a similar failure that cut off service to 125 million devices.

If you were affected by either, you well remember how frustrating – perhaps even dangerous – the experience was. Wireless connectivity isn’t just about shopping online or checking your social media accounts anymore.

It’s about letting loved ones know you’re alright, managing entire businesses, and running government programs. That’s why American Tower is so important: because it owns cell towers that facilitate those connections.

Founded in 1995 during the early days of the cellular revolution, American Tower had amassed a portfolio of about 10,000 towers by the close of the century. Today, that number is up to approximately 223,000… and it’s spread across the American continents, Europe, Africa, and Bangladesh.

It then leases out those high-rising assets and other vertical spaces to wireless carriers like Verizon, AT&T, and T-Mobile (TMUS). It doesn’t have to spend a single cent on installation or maintenance from there since its clients handle all of that themselves.

Even better, a single cell tower can host two, three, or even four carriers at a time. So while American Tower’s operating costs stay low, its income keeps growing from the long-term contracts its “tenants” sign.

Speaking of tenants, the company came to realize that its communication infrastructure was, in fact, commercial real estate (CRE). So it converted to a REIT in 2012 – the first of its kind to do so.

That means it’s now legally required to pay at least 90% of its annual income to shareholders by way of dividends. Along the way, it’s even raised that dividend annually for the past 11 years straight.

That’s a very clear mark of a healthy company, though hardly the only one Wide Moat looks for.

Healthy companies with long-term value also have wide business moats that keep customers coming in and competitors at bay. And American Tower’s is formidable.

Anyone wanting to replicate its infrastructure reach would have to:

Now, some investors argue that SpaceX’s (SPCX) Starlink satellite broadband service will make wireless networks obsolete all around. But as I’ve argued before, I don’t see how.

At least I don’t see it happening anytime soon.

Starlink is an incredibly powerful and helpful technology when traditional broadband isn’t available. Rural communities, ships, and aircraft can all benefit from it greatly.

But they’re the exception, not the rule. Most mobile users simply aren’t going to carry around portable satellite terminals with them. As such, billions of people around the world will continue paying wireless carriers for their service.

And wireless carriers will continue paying cell tower companies for their air-up-there rentals.

But here’s another reason why I like American Tower today: It also owns data centers, just like Iron Mountain.

Those efforts began in 2019, when it bought up Colo ATL, a small, Colorado-based colocation company. This gave it about 26,000 square feet of data center space to work with – hardly the largest amount.

Two years later, however, it made another move, this time purchasing data center REIT CoreSite Realty for about $10.1 billion. And that automatically made it a meaningful player in the field.

American Tower now owns data centers in pivotal markets such as Boston, New York, Northern Virginia, Chicago, Denver, Silicon Valley, and Los Angeles. Towers remain its primary earnings engine, mind you.

But it’s got a nice “little” business on the side now – one that generated $1.05 billion in property revenue in 2025, up 14% year over year.

Now, as I’ve already said, American Tower is trading much more cheaply than Iron Mountain. And that’s attractive at first and second glances.

However, there are always risks to know about. And American Tower is no exception to that rule.

One of the reasons its valuation looks the way it does is because investors worry that slowing carrier spending will translate into slower leasing activity.

Here in the U.S., for instance, Verizon, AT&T, and T-Mobile have all finished most of their 5G buildout. And they’ve become more disciplined with their capital expenditures as a result.

Then there’s American Tower’s international business, which faces currency headwinds off and on. Considering everything going on in the world so far this decade, some investors think it should have waited to buy CoreSite.

Those concerns are then compounded by a general bias against REITs that raises its ugly head every time interest rates go up or stay up. These companies are very dependent on financing, and the cost of that is elevated.

It usually doesn’t matter how intelligently a REIT navigates these troubled waters. Investors will punish its share price anyway.

We understand all those concerns here at Wide Moat. But we also recognize that none of them fundamentally impair the company’s long-term competitive position.

Its towers are still absolutely vital to how the world turns. And with wireless data consumption growing at exponential rates, its data centers will only become more valuable from here.

As shown below, American Tower now trades at just 15.2x adjusted funds from operations (AFFO). That’s quite the drop from its historical position of 22.2x.

Make no mistake: We aren't assuming AMT will return to its full historical valuation. But even conservative growth to 17x would mean annualized total returns of roughly 20%.

Plus, investors who act now will be paid a 4.2% dividend yield while they wait for that to happen. That’s a compelling combination for investors who want a piece of the AI infrastructure buildout without paying premium valuations.

At Wide Moat Research, we believe American Tower represents exactly the kind of wide-moat, sleep-well-at-night (SWAN) business we want to own. The market may not fully appreciate that today, but we believe it eventually will.

Happy SWAN investing!

Brad Thomas
Editor, The Wide Moat Daily

The Wide Moat Show’s July 16th episode focused on “7 strong buys” – complete with two stocks trading at especially attractive price points. And we were pretty pleased with those finds.

If you were too, you’re going to love the “7 more bargain stocks” we’ve laid out in this latest video. We’re talking massive discounts that we’ve discovered!

Click here to watch Nick Ward and me discuss what these companies are… why they’re trading so cheaply…

And what kind of returns we think they can make for intrepid investors in the months ahead.