UBS’ Bottom Quant Stocks In AI, IT, Healthcare & Others: 29 Stocks In All Sectors

22. Digital Realty Trust, Inc. (NYSE:DLR)

Number of Hedge Fund Investors In Q2 2024: 44

Sector: Real Estate

Digital Realty Trust, Inc. (NYSE:DLR) is a specialty real estate investment trust that works with the data center industry. The firm provides colocation spaces that allow firms to work in proximity to each other. Its shares are up 39.5% over the past twelve months and 32% year to date driven by the fact that data center stocks are seeing considerable interest from Wall Street in the artificial intelligence era. Since it’s a real estate data center stock, Digital Realty Trust, Inc. (NYSE:DLR)’s performance depends on the percentage of its properties that are occupied and the rates that it can charge customers. On these fronts, the firm’s third-quarter earnings saw it report $521 million in bookings and 31.4% renewal rates for facilities supporting more than one megawatt of power. This indicates strong demand for its properties, and the stock’s 9.6% jump following the report was unsurprising. Digital Realty Trust, Inc. (NYSE:DLR) also ended the quarter with $860 million in backlogs and $521 million in leases which underscores the strong demand for its properties.

Digital Realty Trust, Inc. (NYSE:DLR)’s management shared its market insights during the Q3 2024 earnings call:

“Over the past few weeks, we’ve seen several examples of the lengths that some hyperscalers will go to reserve enough power for their fast growing compute requirements. We’ve seen a deal to reactivate 3 mile Island, another hyperscaler partnering with an existing utility to develop small modular reactors and the third executing power purchase agreements to purchase nuclear energy for multiple SMRs that have yet to be built.

These agreements are similar, in that they are seeking long-term carbon-free energy solutions to help power growing data center portfolios and speak to the longer-term demand outlook for data center capacity. Yet each of these plants is still years away from beginning to generate power, underscoring the value of lower capacity blocks today and perhaps for the next several years. And sourcing available power is just one piece of the data center infrastructure puzzle. Supply chain management, construction management and operating expertise are all challenges that customers rely on Digital Realty to solve, and they are clearly a critical aspect of the overall value proposition that we bring to the table. While the large hyperscale deals get plenty of focus, customers and partners are recognizing the value that Digital Realty’s meeting place can bring to their private cloud and hybrid IT applications around the world.”