In recent weeks, I’ve documented several high-profile investments in the U.S.
Most recently on May 15, Lego had just announced plans to build a 2 million-square-foot warehouse in Virginia…
Kraft Heinz (KHC) said it would spend $3 billion to upgrade its U.S. facilities…
Saudi Arabia pledged $600 billion in total investments into the U.S…
And Qatar committed to a $200 billion deal with Boeing (BA).
Moreover, as I wrote last month, those were on top of:
-
$20 billion from French shipping and logistics company CMA CGM to build or update ports, shipping, and associated assets
-
$18 billion from gas company Venture Global (VG)
-
$1.7 billion from yogurt-maker Chobani, including a $1.2 billion dairy plant in New York
-
$1 billion from Anduril Industries to build a new drone and defense technology plant in Ohio
-
$1 billion from GE Aerospace (GE) to build jet engines
-
$700 million from Schneider Electric into U.S. energy assets, its largest investment ever in 135 years
-
$350 million from Bel Brands to expand cheese and snack production by 10,000 tons per year
And there has been one more recent announcement that caught my eye…
Last week, Amazon (AMZN) announced a $10 billion investment to expand its cloud and AI data centers in North Carolina.
This is just one more bit of evidence for the on-going data center boom we’ve been covering here at Wide Moat Research.
The Data Center Boom Won’t Slow Anytime Soon
Data centers are the lynchpin of generative AI like ChatGPT and its peers. These massive, power-hungry facilities provide the computing infrastructure to train, deploy, and run these models. That’s why the growth of data centers has run lock-step with the adoption of these models.
And it’s why you have the large tech firms committing tens of billions of dollars this year to build out this capacity.
Amazon’s announcement is just one more bit of evidence…
Vice President of Public Policy Shannon Kellogg said in his corporate announcement last week that this latest investment:
… supports the [Trump] administration’s vision to strengthen American infrastructure and further safeguard our nation’s data. By creating hundreds of high-skilled jobs and partnering with local communities, Amazon is helping to drive economic growth and advance U.S. leadership in AI.
Amazon operates dedicated online marketplaces in 21 countries outside the U.S. – including prominent European countries, Japan and India, Brazil, and Australia. And its cloud services, Amazon Web Services (“AWS”), also has a global footprint.
Yet it’s investing billions into a single U.S. state.
Moreover, back in January, the e-commerce giant announced $11 billion plans for Georgia.
And Amazon isn’t the only Big Tech firm committing big money to American AI. Remember that Japan’s Softbank, Oracle (ORCL), and OpenAI came together earlier this year to pledge $700 billion into this kind of infrastructure.
Alphabet (GOOGL) will be spending $75 billion. And Microsoft (MSFT) says it’s good for $80 billion. As Yahoo Finance reported in February, those two companies combined with Meta Platforms (META) and Amazon:
… are expecting to spend a cumulative $325 billion in capital expenditures and investments in 2025 driven by a continued commitment to building out artificial intelligence infrastructure… this marks a 46% increase from the roughly $223 billion those companies reported spending in 2024.
That means enormous amounts of money into data centers specifically – some of which Big Tech will build and operate themselves, and some they’ll pay others to run.
Become a Virtual Data-Center Landlord
It should be no surprise that the best-performing property sector over the past decade has been data centers. They’ve been on fire ever since they debuted in 2015, as shown below:
Source: Wide Moat Research
Digital Realty (DLR) and Equinix (EQIX) are the two pure-play data-center powerhouses today. But the business is doing so well that other companies are buying into it as well.
Telecommunications real estate investment trust (“REIT”) American Tower (AMT), for instance, acquired data center developer CoreSite for $10.1 billion in 2021. That deal added 25 data centers to AMT’s portfolio. And four months prior, Blackstone (BX) made its own $10 billion investment into the industry.
As of March 2022, global investment firm KKR (KKR) also owns data centers through an agreement with Global Infrastructure Partners. And secure storage REIT Iron Mountain (IRM) owns 29 of them at last check… generating an estimated $800 million in revenue this year alone.
Warehouse giant Prologis (PLD), meanwhile, plans to invest $25 billion (in the coming years) into such facilities across major markets like Chicago and Texas. It has been partnering with Skybox Datacenters since 2021, in fact.
Prologis recognizes that data-center margins are 50% to 100% higher than warehouses. So I expect it to continue pushing into the sector from here.
Last but not least, net-lease REIT juggernaut Realty Income (O) formed a joint venture with Digital Realty back in November 2023. It pledged about $200 million for an 80% equity interest to build two new data centers that just opened last year.
There are many ways to become a virtual landlord… building a solid income stream with superior risk-adjusted returns.
Just make sure you’re not buying in at elevated prices. Any business – even data centers, with all of their popularity and long-term prospects – should be purchased with care.
That’s why Wide Moat Research will be releasing our all-new REIT tracker in just a few days. It’s designed to help you learn more about the real estate opportunities you’re interested in, giving you an informed advantage.
As always, thank you for the opportunity to be of service, and happy SWAN investing!
Regards,
Brad Thomas
Editor, Wide Moat Daily
|