AI Needs Data Centers, and Digital Realty Trust Delivers Them

Artificial intelligence (AI) is a desirable investment right now, as companies work around the clock to bring AI-powered operations online, either to achieve efficiencies or attract new customers. UBS reports that global spending on AI is expected to be $375 billion this year and $600 billion in 2026.

But there are lots of different ways to invest, as BlackRock CEO Larry Fink recently pointed out to CNBC. "Investing in AI does not just mean investing in GPUs and chips, it means investing in HVAC and IT, investing in power grids and power supplies," he said.

Perhaps you've already looked at all the big names -- semiconductor stocks like Intel, Nvidia, Broadcom, and Advanced Micro Devices, or hyperscalers like Microsoft, Amazon, or Alphabet. They're all solid companies in the AI space. But if you want to take Fink's suggestion and look at AI from a different perspective, what about a real estate investment trust like Digital Realty Trust (NYSE: DLR)?

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AI investments with a REIT

Based in Dallas, Digital Realty is a data center REIT that owns property in North America, Europe, Asia, and Australia. The company offers data center and connection services to customers that include financial companies, energy firms, cloud and information technology companies, and healthcare organizations.

The company has more than 300 data centers located in more than 50 metropolitan areas. Customers include Microsoft, Amazon Web Services, Google Cloud, and Nvidia -- a who's who of the AI computing community. Digital Realty says that more than 250 Fortune 500 companies use its data centers.

The company currently has about 2.8 gigawatts of computing capacity. That's a lot, considering a single gigawatt is approximately the output of an average-sized nuclear plant. It's currently constructing centers that would provide another 750 megawatts. And that's just to start with. Digital Realty says it has enough land to fully build out 7.5 gigawatts of computing capacity, with 4.5 gigawatts being in North and South America.

Speaking to analysts in the company's most recent earnings call, CEO Andy Tower called the current AI buildout "a full-fledged technology race."

"With each passing week, we continue to see massive investment announcements and partnerships aimed at scaling the infrastructure necessary to support the world's most powerful AI training models," he said. "Given the scale of these announcements, the ongoing development and proliferation of AI offerings, the opportunity still appears to be in the very early innings."

Digital Realty by the numbers

Earnings for the third quarter showed revenue of $1.57 billion, up from $1.43 billion a year ago. Net income of $57.6 million was up from $41 million in the same quarter of 2024, and adjusted earnings per share came in at $0.15 -- a improvement of $0.06 per share from the previous year.

Realty Income saw its data center revenue rise 9% from a year ago, with a backlog of $852 million. More than 50% of its bookings were related to AI, the company said.

The company has more than $900 million committed to capital expenditures (capex) as it works to increase its data center capacity in metro areas with high demand, and it says that it plans to increase capex next year. It increased full-year guidance by $75 million, the third consecutive quarter management has raised its guidance.

An AI stock with a dividend

As a REIT, Digital Realty is required to distribute at least 90% of its taxable net income to shareholders in the form of a dividend. That makes it extremely attractive to income investors, who can either use the dividends to pay monthly expenses or reinvest them to accelerate their returns.

Digital Realty's current payout is $4.88 per share, or a 2.9% dividend yield. That's not as high as some REITs, but it's exceptionally high for a stock in the high-flying AI space.

The stock hasn't performed well this year -- it's down about 3% in 2025 -- but the payout makes it more palatable. As data centers continue to expand, Digital Realty looks poised to offer a rare combination of growth and income for the foreseeable future.

Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Digital Realty Trust, Intel, Microsoft, and Nvidia. The Motley Fool recommends BlackRock and Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.