We recently compiled a list of the Top 12 Trending AI Stocks on Latest News and Ratings. In this article, we are going to take a look at where Digital Realty Trust, Inc. (NYSE:DLR) stands against the other trending AI stocks.
Donald Trump is turning out to be the spark to take artificial intelligence investments to new heights. Just days after repealing an executive order to regulate AI risks, the US president unveiled a $500 billion private sector initiative. Stargate is the project that underscores how companies are racing against time to position themselves amid the AI revolution.
“The Stargate Project is a new company which intends to [build] new AI infrastructure for OpenAI in the United States,” OpenAI, Oracle, and SoftBank said in a joint statement. “This project will not only support the re-industrialization of the United States but also provide a strategic capability to protect the national security of America and its allies.”
The new AI initiative, which includes several leading AI developers, including ChatGPT creator OpenAI, paves the way for the construction of data centres needed to power and support various AI models. With Goldman Sachs estimating that AI will represent 19% of data center power demand by 2028, tech giants are racing to construct and secure data center compute capacity.
The growing investment comes amid significant technological advancements made in AI, especially in machine learning and generative AI models like ChatGPT. Investments are expected to soar as companies look to gain a front seat amid the revolution and strengthen their competitive edge. However, it’s unclear if these investments will pay off proportionately.
The cost of training a single frontier AI model is rising exponentially, from $1,000 in 2017 to almost $200 million in 2024. The increase comes amid consistent returns to scale in AI model training data, compute capacity, and model complexity. Even though unit costs per computing operation have rapidly decreased over the same period, costs could still reach billions of dollars by 2030. By the middle of the 2030s, the hardware costs of the world’s AI infrastructure might surpass $1 trillion.
Amid the escalating cost concerns, physical artificial intelligence has emerged as the next frontier of AI investing. Companies are increasingly investing in robotics makers, auto suppliers and specialty semiconductor companies.
The AI technology began with search bots and has since advanced to “agentic AI,” which includes research assistants and customer support agents. Investors examining the cutting edge of this technology are now concentrating on interactions in the real world with autonomous devices that use artificial intelligence, such as self-driving cars, drones, and robot nurses.
“As you go into 2025, agentic AI is that next inflection point here before you hit that physical AI moment … like with everything else in the world, you have to crawl before you can walk and then run,” said CFRA senior equity analyst Angelo Zino
The soaring investments around AI have also given rise to exciting investment opportunities. Likewise, investors are increasingly jostling for positions in tech giants and little-known companies with exposure to revolutionary technology.
Our Methodology
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up view of a technician installing a server in the data center facility, representing the reliable services provided by the company.
Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 52
Digital Realty Trust, Inc. (NYSE:DLR) brings companies and data together by delivering the full spectrum of data center, colocation, and interconnection solutions. After gaining 30% in 2024, analysts at UBS upgraded the stock to a Buy on January 7th and raised the price target to $205 from $147.
The upgrade occurs against a backdrop of ongoing demand for enterprise, hyperscale, AI solutions, and anticipated power and space limitations. These elements support a favourable demand and pricing environment for Digital Realty Trust, Inc. (NYSE:DLR). With a record backlog of almost $900 million and over $1 billion in bookings over the past 12 months, the data center REIT provides insight into its future growth trajectory.
Digital Realty Trust, Inc. (NYSE:DLR) is staring at tremendous opportunities as high data center demand should result in a favorable pricing environment. Analysts expect Digital Realty to deliver mid-single-digit growth on its Core Funds From Operations (FFO) per share in 2025 and accelerate in the following years. The growth should bolster the balance sheet, its leverage having reduced to approximately 5x by the end of 2024.
Overall DLR ranks 7th on our list of the trending AI stocks on latest news and ratings. While we acknowledge the potential of DLR as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DLR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.