AI data center backlash boosts data center REITs as supply tightens

AI data center backlash boosts data center REITs as supply tightens

Protests and policy pressure against AI data centers are growing nationwide, with many communities citing land use, electricity and water consumption, and noise. The pushback could benefit existing data center owners through tighter supply, even as new projects face delays.

Public opposition rises as AI builds accelerate

A recent NBC News poll found that 69% of respondents oppose the construction of AI data centers in their area. The United States already has more than 4,700 data centers, and the number is expected to grow rapidly.

PwC projects annual data center spending will rise to $1.8 trillion in 2050 from roughly $800 billion in 2026. Some states are advancing legislation to restrict or ban construction, and New York has a moratorium in place.

REITs as a way to play the AI infrastructure cycle

Data center REITs own and lease space to multiple tenants, including Amazon, Apple, and Oracle, according to the National Association of Real Estate Investment Trusts. Mizuho analyst Vikram Malhotra said political and community pushback could delay new projects while supporting existing data center REITs with pricing power tied to expanding compute demand.

Data center REITs account for 13% of the total U.S. REIT market capitalization of $1.5 trillion, according to Nareit. Public REITs own about 275 data centers in the United States, less than 10% of owner-operated and leased facilities nationwide.

Key stocks in the FTSE Nareit Equity REITs Index

The FTSE Nareit Equity REITs Index includes three data center companies: Digital Realty Trust, Equinix, and Iron Mountain.

  • Digital Realty Trust (DLR): 2.59% dividend yield, up 23.3% year to date
  • Equinix (EQIX): 1.99% dividend yield, up 36.9% year to date
  • Iron Mountain (IRM): 2.96% dividend yield, up 42.0% year to date

Equinix is the largest, with a market value of roughly $102 billion. It has a 1.99% dividend yield and has climbed about 37% year to date. Equinix recently signed a deal with Nvidia. In July, the company’s second-quarter adjusted funds from operations (AFFO) topped expectations and it raised full-year guidance.

Digital Realty Trust has a market cap of $71 billion, a 2.59% yield, and is up more than 23% in 2026. The company reported adjusted FFO above analyst estimates in July and raised full-year guidance.

Iron Mountain has a $34.7 billion market cap, a 2.96% dividend yield, and is up 42% this year. Its second-quarter AFFO beat expectations, and it raised full-year guidance.

Analysts see a supply-demand tailwind, with growth tradeoffs

Wells Fargo Investment Institute analyst Amanda Martinez said the supply-demand balance could favor data center REITs if new capacity becomes harder to develop. She noted that permitted development sites with secured power could offer a relative advantage.

Martinez also warned that permitting restrictions and moratoriums could slow development timelines and increase costs, weighing on future growth.

Green Street analyst David Guarino said Equinix and Digital Realty can pivot across markets due to scale, land banks, and development pipelines. He also cited long-standing relationships with local municipalities as a competitive advantage.

Hoya Capital Real Estate president and director of research and ETFs Alex Pettee said existing facilities become more valuable if zoning tightens, power is harder to secure, and communities resist new sites. He added that both Equinix and Digital Realty are in Hoya’s model portfolios.

Why it matters

If AI data center construction faces tighter permitting and community resistance, the market may reprice existing capacity. That dynamic can support cash flow and pricing power for data center REITs while limiting the pace of new supply.