Data center boom boosts communications infra companies but supply catching up

Investing.com -- Demand for data centers and internet infrastructure is outpacing supply benefitting U.S. communications infrastructure companies, but the imbalance is likely to ease in the next few years.

Bernstein began coverage of Digital Realty, Equinix, CoreWeave, and Crown Castle amid surge in spending tied to artificial intelligence and cloud computing.

Analysts said more than $1 trillion in investment has been pledged toward physical infrastructure in the current cycle, including large-scale data center construction to support rising demand for computing power.

That demand is growing faster than new capacity can be built. Bernstein forecasts global data center demand to expand at a 13% compound annual growth rate through 2028, keeping pricing high and vacancy rates low in the near term.

The firm expects market-wide vacancy to reach a trough of about 4.9% in 2026 before rising above 10.5% by 2028 as new facilities come online.

Within the sector, Bernstein favors companies focused on enterprise customers rather than hyperscale cloud providers. It named Digital Realty its top pick, citing stronger enterprise growth as competitors prioritize hyperscaler demand.

The brokerage also rated Equinix Outperform, saying the company’s slower build pace should allow it to strengthen its position in enterprise data centers as new projects come online.

Bernstein was more cautious on CoreWeave, rating the company Underperform. Analysts said the “neocloud” model faces risks because hyperscale cloud providers can shift from partners to competitors, potentially limiting long-term growth.

The firm expects CoreWeave’s growth to slow sharply in 2027 and 2028, which it said could pressure cash flow and margins.

Bernstein also began coverage of telecom tower operator Crown Castle with an Outperform rating, citing improving revenue prospects and confidence in the company’s turnaround efforts.

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