Undervalued and Profitable: 3 AI Stocks That Still Fly Under the Radar

Core Insights - The article highlights that while major AI stocks like Nvidia and Microsoft are well-known, there are compelling investment opportunities in lesser-known data center companies that support AI infrastructure [1][2]. Data Center Industry Overview - Data centers are essential for AI systems, providing the necessary physical infrastructure, power, cooling, and security [3]. - Significant investments in AI infrastructure are expected, with Nvidia projecting $1 trillion in AI chip sales by 2027 and Amazon planning to spend $200 billion on capital expenditures in 2023 [2]. Key Data Center Companies - Equinix (EQIX): The largest data center operator globally, with over 260 data centers in 36 countries and more than 500,000 interconnections, recognized as the industry gold standard [4]. - Digital Realty Trust (DLR): The only other pure-play data center REIT, serving over half of the Fortune 500. It focuses on wholesale large-scale deployments, contrasting with Equinix's retail colocation model [5]. - Prologis (PLD): While primarily a logistics space owner with 1.3 billion square feet, Prologis is shifting focus to data centers, leveraging its extensive land holdings and financial strength for lower borrowing costs [6]. Financial Performance and Valuation - Equinix reported record annualized gross bookings and expects double-digit revenue growth in 2026, leading to a 10% stock increase following its 2025 results [7]. - Digital Realty Trust experienced a 10% year-over-year increase in core FFO for 2025 and has a strong backlog heading into 2026 [8]. - Prologis achieved its best quarter for lease signings, indicating a positive shift in its core industrial real estate business [8]. - Current valuations show Equinix trading at about 24 times FFO with a 2% dividend yield, Digital Realty at a similar multiple with a 2.8% yield, and Prologis at about 21 times expected 2026 FFO with a 3.2% yield [9]. Investment Outlook - With substantial data center investments anticipated in 2026 and beyond, these data center stocks present an attractive entry point for exposure to the AI sector [10].