Chapter 1: 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.
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Chapter 2: 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.
Chapter 3: 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.
Chapter 4: 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.
Chapter 5: 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.
The IEA projects that global energy consumption for data centers alone will double by 2030. And in the United States, the Pew Research Center projects that AI-based electricity usage will rise 133% in that same time period. So I understand that a lot of investors hear that, and they think the obvious takeaway is that there's going to be a need for infrastructure investment, right?
That's a great opportunity for energy investments over the next couple of years because you need energy to power those initiatives. What do you personally make of that?
Yes, I mean, there is definitely that side to it. But like you said, it's a multi-layered story.
Chapter 6: How are investors finding exposure to data center stocks?
The big story here isn't just that there is a big demand for more energy. It's also that the imbalance between supply and demand means that prices are rising and it's hard to keep up with the build-outs as fast as you need to. So what a lot of hyperscalers are doing is they're taking control of their own destiny and building their own energy sources.
building or buying i should say for example recently microsoft has restarted or signed a deal to restart three mile island with the the kind of traditional reactors that are already there but they're gonna get replaced over time with the smaller modular reactors So nuclear power in Microsoft's hands, but they're not the only ones. Amazon is doing the same thing.
They recently bought a nuclear powered campus with plans to install modular mini reactors. And Google isn't exactly doing that. Instead, they're signing deals with independent companies like NextEra Energy. which is another supplier of modular nuclear reactors.
Chapter 7: What are some under-the-radar companies benefiting from data centers?
Nuclear is making a comeback a decade or so after Fukushima, but in a different form. And maybe this will go over okay with the people and regulators. I don't know. But it's one way to get your hands on cheaper energy in the long run. It's still not cheap to build, but it will get affordable to run. So that's one way to get the power you need for your data centers.
It reminds me of this quote. I never watched House of Cards, but I know this quote from the Netflix TV show, which is, what is it? Powers, the new real estate, something along that line. And I think the commentaries around physical power, like, you know,
Chapter 8: What insights can be gained from the discussion on data center investments?
the influence you have over other people, not actual energy power. But in this context, for the people who are investing and trying to make AI a reality, it is kind of the real estate that you need. And it is, I think, the bottleneck that investors are missing, which is the energy consumption that is necessary. And it's very much the real bottleneck that these hyperscalers are facing. You
physical real estate in the world in Northern Virginia, wherever it may be. And you can have access to all the capital in the world.
But if you don't have access to energy, or if there are local regulations or local pushback that is preventing you from being able to access the energy that you need to run your data centers, then you lack the power, you lack the influence to actually make your dreams, whatever they may be, your data centers a reality. So it
It makes a lot of sense to me that we see companies like NextEra, Microsoft, Amazon, Google, all of these companies trying to gain access to the limited supplies of energy and power that they need to now. Because what they're talking about in terms of the build-out of data centers, they need that. And right now, that is the bottleneck that exists.
Right. And it's not exactly new. I know for years, companies like Microsoft and Google have been building data centers with paying close attention to where they get their energy from and signing deals with local water power resources in places like Canada and northern Sweden, for that matter. There's a Google data center up in Kiruna somewhere. that is powered by a local waterfall, basically.
So it's not exactly new, but it's up to a new level.
Yes, exactly. And that's why I'm so excited about this opportunity because so many people stop at that one level of degree where they think about data centers and they think about the companies physically building data centers and they don't get to the next degrees of separation about the companies that are helping make data centers a reality.
So up next, we're going to be breaking down the investment opportunities for data centers, but at different points on the value chain. So stick with us. We're going to be taking that one step further, talking about some specific companies benefiting from the AI data center build out.
Nyt on Matilla taas hermotkireällä. Viisi ärhäkkää työsähköpostia ennen lounasta. Mikä oikeasti hiertää? No se on tietysti työtuoli. A.J. tuotteiden ergonomisilla kalusteilla työpäivä sujoo mukavammin. Se on Happiness at Work. Kalusteet koko työpaikalle seitsemän vuoden takuulla.
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