Digital Realty, Equinix ramp up datacenters as AI drives demand

US real estate investment trusts Digital Realty Trust Inc. and Equinix Inc. are expanding their development pipelines to meet the increased demand for datacenters, fueled by the growth of artificial intelligence.

Through the end of the first quarter, Digital Realty's announced development pipeline in the Americas included additional future capacity totaling 499 MW; leasing stood at 79% of the planned capacity. The Northern Virginia area leads with a capacity of 384 MW, followed by the Chicago and Dallas areas.

Equinix plans to add in excess of 24,000 cabinets through 2027 to its existing portfolio of more than 144,000 across the Americas. To take advantage of the AI boom, the datacenter REIT expects to spend $4 billion to $5 billion a year through 2029, a significant increase from the $3.3 billion spent in 2025, according to a report from Barron's.

"Our ambition is to double our capacity by the end of 2029. In other words, our aspiration is to bring as much capacity online in the next 5 years as we did in the past 27 years," President, CEO and Director Adaire Rita Fox-Martin said during a June 25 analyst/investor day.

In an S&P Global Market Intelligence 451 Research analysis of both REIT portfolios, Digital Realty held the largest share of leased datacenter power in the US in the fourth quarter of 2024, with a 15% share. Equinix was the fourth-largest provider, accounting for 4.9% of the market.

Potential risks

Supply chain disruptions pose potential risks to datacenter companies, whether private equity-backed or publicly traded, according to Dan Thompson, a principal research analyst at 451 Research.

Datacenter development requires extensive planning and investment due to supply chain issues and infrastructure needs. This has resulted in longer lead times for essential equipment, complicating construction timelines, Thompson said.

– Download a spreadsheet with data featured in this story. – Read about the projected 30-fold increase in US AI datacenter power demand by 2035.

Datacenter companies also face risks from contractual obligations with hyperscalers, or large-scale cloud service providers, as these contracts often include escape clauses that allow customers to exit agreements in the event of significant scheduling delays.

"If you run into a one-year delay, you can be sure the hyperscalers are going to come back and have some very serious questions," Thompson said.

Equinix and Digital Realty both lease facilities to hyperscalers. Equinix tenants include Amazon Web Services Inc., Google LLC, Microsoft Azure Inc. and Oracle Corp. Digital Realty's tenant roster includes Amazon Web Services, International Business Machines Corp., Oracle and Meta Platforms Inc.

Both companies have made efforts to diversify their customer bases, but Digital Realty's concentration in Northern Virginia leaves it "pretty heavily leveraged towards the hyperscalers," Thompson said. "So it does actually represent a risk for them."