Key Points
Leading cloud companies plan to plow $500 billion into capital projects this year.
Equinix partners with many cloud companies to help them meet their data center capacity needs.
Its build bolder strategy will see the data center REIT double its capacity by the end of the decade.
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Hyperscale cloud computing companies like Google, Amazon, and Microsoft are on track to invest a staggering $500 billion in capex this year. Google alone expects to invest between $175 billion and $185 billion in 2026, up from $91.5 billion last year. That's well above the $115 billion analysts expected the tech titan to invest this year as it ramps up its spending on AI computing power capacity (servers, data centers, and networking equipment).
Technology companies aren't the only ones investing heavily in building new data centers. Leading data center REIT Equinix (NASDAQ: EQIX) is rapidly scaling its global data center platform to support the expansion of hyperscalers and other customers. These investments could enable the REIT to double in value in the coming years.
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A leading global data center platform
Equinix is one of the world's largest REITs. At the end of the third quarter, it operated 273 data centers in 77 markets (36 countries). Its global data center portfolio supports over 10,000 customers, including Google, Amazon, and Microsoft. The tech titans lease space from Equinix and are cloud services partners.
Demand for space across the REIT's portfolio is robust and growing. It delivered record annualized bookings of $394 million in the third quarter, up 25% year over year and 14% from the second quarter. Equinix closed over 4,400 deals with more than 3,400 customers, including cloud and AI services providers. That helped drive a robust 11% increase in the company's adjusted funds from operations (FFO) during the quarter.
Building bolder
Equinix is investing heavily to more rapidly expand its data center capacity as part of its build bolder strategy. It currently has 58 major projects underway worldwide, including 12 of its xScale data centers (AI-ready hyperscale data centers). It added seven new projects in the third quarter and expanded its land bank in several metro areas to support future developments.
The data center REIT now has the space to deploy 3 gigawatts of capacity. That's part of its strategy to double its data center capacity by 2029. CEO Adaira Rita Fox-Martin noted that its "aspiration is to bring as much capacity online in the next 5 years as we did in the past 27 years."
Equinix plans to invest $4 billion to $5 billion in capital annually from 2026 through 2029 under this plan, up from its $3.5 billion to $3.9 billion guidance range last year. This investment level should support strong revenue, adjusted FFO, and dividend growth rates in the coming years.
Plans to double in five years
Equinix's build bolder strategy will see it double its data center capacity by the end of the decade to support the growth of hyperscalers such as Google, Amazon, and Microsoft. That's more expansion in five years than it delivered during its first 27 years as a company. This bold strategy could enable the company to double its value in the coming years, making it a compelling way to play the data center capex boom.
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Matt DiLallo has positions in Alphabet, Amazon, and Equinix. The Motley Fool has positions in and recommends Alphabet, Amazon, Equinix, and Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
