For Data Centers, Power is the New Real Estate (Literally)
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What is the main opportunity in data centers?
The opportunity in data centers is increasingly looking like an opportunity in power and real estate. We're digging in today on Motley Fool Money.
Today is Tuesday, January 13th. Welcome to Motley Fool Money. I'm your host, Emily Flippen, and today I'm joined by Fool analysts Anders Beiland and Dan Kaplinger as we dig into data centers and the different ways investors can play on their build-out without baking in too much risk. We'll walk through all the different players that are helping make data centers a reality, how sustainable the build-out really is, and how mega investors are helping fund them at scale. But to start, we'll We have to talk about why we're discussing data centers today. Of course, everyone knows large tech companies have been building data centers at breakneck speeds to help facilitate the AI ambitions that we all know and some of us love.
I mean, artificial intelligence requires massive amounts of data center capacity to not only handle the queries that are being sent by you and I and enterprises to LLMs, but also to help iterate and constantly train those same models.
How are large tech companies influencing data center demand?
But this is a topic that's really hitting close to home recently for individual Americans alongside investors. I know myself, I live here in Maryland. I'm just a stone's throw away from Northern Virginia. It's ground zero for data center in the United States. CBRE has recently released reports noting that data center vacancies are at all-time lows in the second half of 2025. Many big customers are pre-leasing out capacity into 2027 and beyond. For the people living nearby, this means higher electricity costs and data centers obviously require massive amounts of power to run. That's some of the backdrop. Dan, I want to start with the capacity.
What risks are associated with the overbuilding of data centers?
I think investors' minds often immediately turn to the fear that the data centers that we see so far have actually been overbuilt. That's given the narrative that we talk about a lot around fears around an AI bubble. But the information that we have that I just indicated, I mean, that only shows that demand has continued to outstrip supply. How does that build out look to you today?
It's funny, Emily, because I've heard those stories about how we're overbuilding data centers left and right. But the fact is that most of those data centers that we've heard about, they haven't even been built yet. Investors, I think, are reacting more to news of the planned deployment of future data centers than about data centers that are currently on the ground right now. Building completions, they're going up pretty fast, but it's not an overnight thing. There's a lot of infrastructure, there's a lot of supporting work that has to go into getting a data center up and running. It's going to take years to get all the ones that are planned actually built.
How is energy consumption impacting data center operations?
Now, yes, there is some risk of a reversal if hyperscalers take their plans and get cold feet about, are we going to get the return on investment that we had hoped that we were going to get? Yeah, sure, that might make people pull back on their plans to complete some of the ones that are scheduled to get done in out years. But I think we're a long way from that point. And right now, the existing data centers that are up and running and operational are not enough to take care of the current demand that AI and other intensive computing applications are requiring.
Yeah, there's kind of two parts to that equation. There are the people who need the capacity in order to fund operations, to fund the queries and the training that we talked about. And there's also the people who are actually funding the projects themselves, who are offering capital. You need both part of those equations to make that work.
What companies are leading the charge in data center infrastructure?
And so far, we haven't seen cracks happening on either side of those equations. But that doesn't mean that there hasn't been public pushback just from the peoples whose daily lives have been impacted from these expansions and others. That build-out that is happening and continues to happen, as Dan mentions, it has massive implications for things like energy consumption.
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Chapters
8 chapters
1
What is the main opportunity in data centers?
0:05–1:12
2
How are large tech companies influencing data center demand?
1:12–1:50
3
What risks are associated with the overbuilding of data centers?
1:50–2:53
4
How is energy consumption impacting data center operations?
2:53–3:46
5
What companies are leading the charge in data center infrastructure?
3:46–4:45
6
How are investors finding exposure to data center stocks?
4:45–5:54
7
What are some under-the-radar companies benefiting from data centers?
5:54–6:41
8
What insights can be gained from the discussion on data center investments?
6:41–21:36