Artificial
intelligence
is
set
to
give
the
global
data
center
market
a
major
boost,
according
to
Jefferies,
and
usher
in
a
“new
era
of
electricity
demand.”
“As
GPUs
[graphics
processing
units]
have
become
a
larger
part
of
the
data
center
ecosystem
and
drive
AI
investments,
demand
for
power
and
data
center
space
has
grown
at
a
feverish
pace,”
the
investment
bank’s
analysts
wrote
in
a
June
18
note.
They
noted
that
demand
for
data
center
space
has
increased
between
10%
and
20%
each
year
for
most
of
the
past
15
years.
“However,
in
the
past
two
years,
demand
has
exceeded
30%
in
most
markets,
with
no
signs
of
slowing,”
they
added.
The
bank
said
it
expects
data
center
growth
to
“remain
robust,”
but
power
generation
constraints,
supply
chain
issues
and
labor
market
limitations
will
likely
curb
the
rate
of
acceleration.
Data
centers
house
the
equipment
needed
to
store
and
process
the
vast
amounts
of
data
used
by
computing
systems,
with
AI-related
models
requiring
even
more
data
processing
than
traditional
computing.
As
the
data
center
market
grows,
so
will
demand
for
electricity,
Jefferies
said,
naming
a
slew
of
beneficiaries
in
these
segments
and
beyond.
Favorite
sectors
include
REITs
(or
real
estate
investment
trusts),
power
and
energy
companies
in
the
U.S.,
utility
firms
in
Europe,
and
the
global
metals
and
mining
sector.
Stocks
to
benefit
Jefferies
named
several
stocks
it
sees
as
presenting
attractive
investment
opportunities.
Among
the
“pure-play
data
center”
names
it
likes
are
Digital
Realty
Trust
and
Equinix
.
The
former
is
its
top
pick
given
its
“high
exposure
to
wholesale/hyperscale
data
centers,
where
the
demand
for
data
centers
outweighs
to
ability
to
build
new
supply.”
“Digital
Reality
has
been
able
to
push
rents
on
new
leases
up
more
than
80%
in
the
past
two
years.
While
rents
continue
to
march
upward,
the
in
place
rents
on
expiring
leases
will
continue
to
fall
through
2028
—
as
such,
rent
renewal
spreads
should
continue
to
expand,
driving
improve
internal
growth
each
year,”
the
bank
added.
Jefferies
has
a
buy
rating
on
both
companies
with
a
target
price
of
$149.25
for
Digital
Reality
and
$910.86
for
Equinix—
or
potential
upside
of
2%
and
23%
respectively.
Other
buy-rated
stocks
highlighted
by
the
bank
include:
RWE
in
European
utilities,
EQT
in
U.S.
energy
and
power,
and
Freeport-McMoRan
as
a
beneficiary
of
rising
copper
demand
given
its
use
in
data
center
cabling,
connectors
and
more.
—
CNBC’s
Michael
Bloom
contributed
to
this
report.
