Digital Realty Trust: Can This Data Center Giant Keep Powering The AI Gold Rush?

Data has become the new oil, but someone still has to own the pipelines and the storage tanks. That is precisely the role Digital Realty Trust now plays in global markets: a sprawling landlord to the cloud, AI workloads and hyperscale computing, sitting right at the intersection of real estate and high tech. As of the latest close, the stock has staged a strong recovery from last year’s lows, riding the AI-and-cloud spending wave while wrestling with the cold reality of higher interest rates.

Investors are asking a simple but urgent question: after this run, is Digital Realty Trust still an underappreciated infrastructure powerhouse, or has Wall Street already fully priced in the AI boom?

Discover how Digital Realty Trust connects data centers, cloud, and AI workloads worldwide

One-Year Investment Performance

For investors who were willing to buy when sentiment around data center real estate was gloomy, the last twelve months have been rewarding. Based on public market data, Digital Realty Trust’s stock closed roughly one year ago at a level in the low- to mid-120s in U.S. dollars. As of the latest close, the share price is higher, sitting in the mid- to upper-130s after a choppy, rate-driven ride.

On a simple price basis, that implies a gain in the ballpark of low- to mid-double digits over twelve months, before dividends. Add the REIT’s cash distributions on top, and a hypothetical investor who bought a year ago would be looking at a total return meaningfully above what they would have earned in cash or short-term bonds over the same period. The ride has not been smooth; the stock sold off hard during spikes in Treasury yields and bouts of recession fear, only to rebound as investors regained conviction in the secular demand for AI-ready data center capacity.

The five-day tape tells a more nuanced story. Recently, the stock has oscillated in a relatively tight band, reflecting a market that already recognizes Digital Realty Trust as a key AI-enabler but is waiting for fresh catalysts, such as earnings or new hyperscale leasing announcements, before repricing the shares more aggressively. Over the past ninety days, the trend has tilted clearly upward, with the stock climbing out of its prior consolidation range and pushing closer toward its 52-week highs. Importantly, despite this run, the shares remain below their all-time peaks from the low-rate era, a reminder that valuation is still wrestling with the new world of higher yields.

Recent Catalysts and News

Earlier this week, attention around Digital Realty Trust intensified again as investors continued to digest recent leasing updates and commentary tied to generative AI demand. Market coverage from major financial outlets underscored a familiar theme: hyperscale cloud providers and AI companies are scrambling for power-dense, well-connected data center capacity, and there simply is not enough supply coming online fast enough in key metros. That imbalance has supported strong pricing power and elevated utilization for operators like Digital Realty Trust, particularly in markets such as Northern Virginia, Frankfurt, and key Asia-Pacific hubs.

In recent company communications and industry reports, Digital Realty Trust has emphasized its strategy of aligning more closely with the needs of hyperscalers while still serving enterprise and interconnection customers. The firm has been actively rotating its portfolio, selling non-core or lower-growth assets and reinvesting in campuses where power availability, network density and regulatory stability converge. That has shown up in incremental announcements around new builds and expansions in high-demand regions, as well as joint ventures that share capital burdens with partners.

Another recent talking point across the news flow has been the power constraint narrative. Governments and utilities in several major markets are scrutinising new data center developments, concerned about grid strain and sustainability. Digital Realty Trust has leaned into this by highlighting its work on renewable energy sourcing, efficiency upgrades, and its participation in conversations with regulators and grid operators. Coverage from business media has framed this as both a risk and a moat: it is harder to build, but the operators that can navigate permitting, power contracts and community relations may lock in advantaged positions for years.

Within the last several days, analysts and journalists have also revisited Digital Realty Trust’s balance sheet. The company has previously taken steps to shore up its financial flexibility through asset sales and joint ventures, and newer notes from the Street indicate that refinancing risk looks manageable in the near term, albeit at higher interest costs than in the past decade. That narrative has helped cool fears that rising rates would permanently crush the economics of highly capital-intensive data centers.

Wall Street Verdict & Price Targets

Wall Street’s stance on Digital Realty Trust over the most recent weeks has been cautiously optimistic. Across the big banks, the consensus rating sits around a “Hold” tilting toward “Buy,” with several high-profile firms arguing that the stock is one of the cleaner ways to get structural exposure to AI infrastructure without betting directly on chipmakers or single hyperscale platforms.

Recent notes from large brokerages illustrate the nuance. Analysts at firms like Goldman Sachs have updated their price targets to reflect both the uplift from AI-related leasing and the drag from higher funding costs. Target prices referenced in the last month generally cluster modestly above the current share price, signaling expected upside in the high single digits to low double digits over the next twelve months if the company executes on its development pipeline. J.P. Morgan and Morgan Stanley have similarly framed Digital Realty Trust as a core holding within the data center REIT space, but they remain sensitive to valuation, often highlighting that any acceleration in rate cuts or stabilization in the yield curve could be a material tailwind for the multiple.

Sell-side models in recent research have leaned heavily on projected funds from operations (FFO) growth rather than traditional earnings, noting that cash flow per share should benefit from recent rent escalators, strong renewal spreads, and the monetization of new developments as they stabilize. Several analysts in the past few weeks have pointed out that consensus expectations may still be underestimating how quickly AI workloads can translate into signed leases and higher power densities per rack, particularly in campuses where Digital Realty Trust can offer rich cloud on-ramps and interconnection ecosystems.

At the same time, skepticism is not entirely absent. A handful of research desks maintain a neutral stance, warning that competitive intensity from rivals like Equinix and new entrants backed by infrastructure funds could cap pricing in certain markets. They also flag that if sovereign wealth and private equity capital continue to pour into data center platforms, acquisition competition for prime assets could keep cap rates compressed, limiting accretive deal-making opportunities.

Future Prospects and Strategy

To understand where Digital Realty Trust goes next, you have to look beyond the ticker and focus on the underlying physics of the internet and AI. Every incremental AI model, every cloud workload migration, every streaming service and edge application pushes demand for low-latency, high-bandwidth, power-hungry compute closer to end-users. Digital Realty Trust’s thesis is straightforward: be the neutral global landlord stitching all of that together.

Strategically, the company is doubling down on a few key pillars. First, scale and global reach. Digital Realty Trust already operates data centers across North America, Europe, Latin America, Africa and Asia-Pacific, and it continues to invest where cloud providers want to expand next. That geographic footprint matters when large customers are signing multi-site, multi-region deals, preferring partners that can deliver consistent standards and integrated connectivity across continents.

Second, interconnection and ecosystem density. While hyperscale ‘shell and core’ assets grab the headlines, a big part of Digital Realty Trust’s long-term moat lies in how many networks, clouds, and enterprises it can bring into the same buildings. The more cross-connects and peering relationships that live in a facility, the harder it is for customers to leave. Recent initiatives, including platform-level services and cloud on-ramp expansions, are designed to deepen that network effect rather than simply add square footage.

Third, power and sustainability. The most recent commentary around the company highlights power availability as the critical gating factor for AI-ready capacity. Digital Realty Trust is actively engaging with utilities, signing long-term power purchase agreements, and experimenting with higher-efficiency designs to squeeze more compute out of each megawatt. Over the coming months, expect more headlines not just about new buildings, but about new substations, grid upgrades and innovative cooling approaches. For investors, this becomes a key driver: whoever controls megawatts in the right markets controls pricing.

There are, of course, real risks. A deeper or more prolonged economic slowdown could prompt enterprises to delay migration projects, softening retail colocation demand. Regulatory pushback around data center proliferation could stretch permitting timelines or increase compliance costs. And should interest rates remain elevated for longer than markets expect, returns on new development projects would be under closer scrutiny.

Yet the structural forces favoring Digital Realty Trust are hard to ignore. AI models are getting larger, not smaller. Data sovereignty rules are proliferating, forcing more localized infrastructure. Edge applications, from autonomous systems to real-time analytics, are maturing. Against that backdrop, a landlord with global reach, diverse customers, and a still-solid investment-grade profile occupies a critical choke point.

For now, the stock reflects a tug-of-war between those powerful secular tailwinds and the cyclical drag of the rate environment. If management can continue to prove out disciplined capital allocation, secure power in constrained markets, and translate AI hype into contracted revenue, the next leg of the story could be less about recovery and more about compounding. For investors watching from the sidelines, the question is no longer whether data centers matter. It is whether Digital Realty Trust will remain one of the indispensable platforms at the heart of the world’s digital infrastructure.