A New Data Center Stock Is Coming To Wall Street, But Can It Soar on AI Hype?

Core Insights - The surge in AI usage has significantly increased the demand for data centers, leading to new investment opportunities in this sector [2][5]. Company Overview - Fermi America, a new AI data center project co-founded by Rick Perry, has filed to go public as a real estate investment trust (REIT) with a target valuation of approximately $13 billion [2][8]. - The project will feature a 6,000-acre campus near Amarillo, Texas, designed to accommodate 18 million square feet of AI data centers, powered by a mix of energy sources including nuclear, natural gas, wind, and solar [3][4]. Market Dynamics - Data center REITs, such as Equinix and Digital Realty, are experiencing increased demand driven by AI, but their stock performance has not matched that of other AI-related companies [4][6]. - Since the launch of ChatGPT in late November 2022, Equinix and Digital Realty shares have risen by only 13% and 52%, respectively, while Microsoft and Nvidia stocks have seen increases of 100% and 950% [6][8]. Investment Characteristics - The limited returns from data center REITs can be attributed to the long-term nature of their leases, which restrict their ability to capitalize on the rapid growth in AI demand [7][8]. - The unique characteristics of real estate investing, including long contract durations and dividend requirements, contribute to the subdued performance of AI-exposed REITs compared to other sectors [5][8].