Ditch Digital Realty For Equinix

Core Viewpoint - Equinix (EQIX) is positioned as a superior investment compared to Digital Realty (DLR) due to its better track record, operations, and valuation [5]. Company Comparison - EQIX and DLR are both large-cap companies with market capitalizations of $71 billion and $55 billion, respectively, and operate globally with similar property maps [2]. - EQIX has demonstrated significantly higher growth in AFFO/share, tripling since Q1 2013, while DLR has only seen a 191% increase [6][7]. Operational Strategy - EQIX focuses on building ecosystems within its data centers, enhancing value through direct connections between tenants, which creates a network effect [11][13]. - DLR has primarily built commodity data centers, which, while profitable, do not offer the same competitive advantages as EQIX's ecosystem approach [12][10]. Financial Performance - EQIX's AFFO/share growth has consistently outpaced DLR, with EQIX achieving a 335% increase compared to DLR's 191% since Q1 2013 [6][7]. - During the period from 2018 to 2022, EQIX maintained positive same-store NOI growth, while DLR experienced negative growth [15][17]. Valuation Insights - EQIX's stock price has decreased by approximately 25%, leading to a drop in its AFFO multiple from the 30s to 18.42X, making it an attractive investment opportunity [21][25]. - In contrast, DLR's valuation has not decreased as significantly, trading at 22X forward AFFO [27]. Future Outlook - EQIX's recent earnings report indicated strong growth, with AFFO of $965 million, an 11% increase year-over-year, and a positive outlook for future growth driven by record bookings and a large development pipeline [33][35]. - The company has a robust pipeline with $1.5 billion in preconstruction and $2.9 billion in construction, indicating a strong growth trajectory [38][40]. Conclusion - Both EQIX and DLR are well-positioned to benefit from the growing demand for data centers, particularly in the context of AI development, but EQIX is expected to outperform due to its superior operational strategy and more attractive valuation [45].