The meteoric rise of digital communications over the past three decades has created a relatively new category of tech sector investing. It’s called digital infrastructure, or alternatively, digital architecture, and it includes data centers, server farms, mobile communication towers and microchip manufacturing.
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The first digital mobile networks were launched in 1990 and were called second generation, or 2G, cellular technology. Today, a short 34 years later, information technology companies are in the process of rolling out 5G. To put that in perspective, the speed of 2G was up to about 0.1 megabits per second (Mbps). Modern 5G networks can achieve speeds of close to 10,000 Mbps, or 10 gigabytes per second (Gbps). All of that increased power and speed comes with a corresponding increase in necessary infrastructure. In fact, one of the major factors slowing down the adoption of 5G is a nationwide shortage of cell towers that can facilitate the technology.
And 5G is just the tip of the iceberg. Game-changing technologies like blockchain and crypto, artificial intelligence (AI), and cloud computing didn’t even exist back then, but today they are growing by leaps and bounds. This, coupled with growth of the internet, smart devices and the ever-increasing connectivity of the world, points to fast and sustained growth in data centers and all categories of digital infrastructure.
Investors are increasingly realizing the potential in data center stocks, REITs that specialize in server farms and cell towers, and ETFs that focus on the digital architecture. And they’re smart to do so.
According to recent research by the global consulting firm McKinsey & Co., the demand for data centers and server farms, cell towers, and AI-specific facilities is growing at an astounding rate. Digital tech requires immense real estate, energy and hardware resources. McKinsey projects demand for digital infrastructure to increase by about 43% a year for the next several years. All the big tech companies, including Amazon.com Inc. (ticker: AMZN), Alphabet Inc. (GOOG, GOOGL) and Microsoft Corp. (MSFT), are expanding in these areas to keep up with future demand.
If you are interested in taking advantage of the incredible potential inherent in the digital infrastructure space, here are seven stocks, ETFs and REITs to consider right now:
| Stock/ETF/REIT | Expense Ratio | Dividend Yield |
| Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR) | 0.60% | 1.8% |
| WisdomTree Cloud Computing ETF (WCLD) | 0.45% | — |
| Equinix Inc. (EQIX) | — | 1.9% |
| Crown Castle Inc. (CCI) | — | 5.8% |
| Advanced Micro Devices Inc. (AMD) | — | — |
| Digital Realty Trust Inc. (DLR) | — | 2.7% |
| Nvidia Corp. (NVDA) | — | 0.03% |
Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR)
This $461 million ETF invests in real estate investment trusts, or REITs, and other stocks in the server farm, call center and data center industry.
SRVR is a relatively new fund that was established in 2018 to take advantage of emerging technologies such as cloud computing, digital technology support and AI. The objective of SRVR is to remain strategy-focused and provide investors with international diversification within the data infrastructure industry. Although the fund does invest globally, investors can be assured that the portfolio managers do not invest in developing or emerging-market countries.
The fund chooses stocks from within the GRP 250 Index, the GRP Pure Infrastructure Index, and from the U.S. data center sector. Potential investors should keep in mind that international investing is more aggressive than domestic investing.
The expense ratio of the fund is 0.6%. SRVR is currently yielding 1.8%.
WisdomTree Cloud Computing ETF (WCLD)
WCLD is suitable for investors looking for strategic exposure to growth companies that are primarily focused on cloud computing software and services; an industry closely related to and highly dependent on data storage and server farms.
This fund is an index ETF that tracks the BVP Nasdaq Emerging Cloud Index. Investors should note that the word “emerging” in the name of the benchmark does not refer to emerging-market nations. Emerging in this context means that the portfolio managers feel that the companies are emerging as future leaders in the sector.
The fund is diversified among large-cap and mid-cap stocks. It avoids small-cap issues. WCLD can be used to supplement or replace technology stock holdings or other technology-focused ETFs.
The fund’s expense ratio comes in at 0.45%. As a primarily growth-oriented fund, WCLD does not currently pay a regular dividend.
Equinix Inc. (EQIX)
With a market cap of over $87 billion, EQIX is the largest digital architecture REIT in the world.
Equinix rents modern, high-tech facilities to cloud computing companies, health care companies, financial firms, online retailers, manufacturing companies and many other types of companies that process and store large amounts of digital data.
The company is particularly popular with network services providers, commonly called NSPs, financial services firms — especially app-based payment processing companies — and life sciences firms. It has about 3,500 tenants in those particular industries.
EQIX is a global company with facilities in North America, Europe, Asia, Latin America and the Middle East.
The stock pays an annual dividend of $17.04 a share, which works out to a current yield of 1.9%.
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Crown Castle Inc. (CCI)
CCI is in the cell tower and fiber optics business. This $44 billion REIT owns over 40,000 towers on rooftops and on open land that it rents to mobile phone and internet providers. Additionally, it operates about 90,000 miles of fiber optic cable networks that computer and communication companies pay it to use.
CCI operates across the U.S. and is critical to the efficient and fast delivery of data, financial transactions and wireless phone services in all major cities and large population centers in the country.
This REIT is poised to benefit greatly from the continued rollout of 5G cellular technology and from other emerging wireless technologies.
CCI is currently yielding 5.8%.
Advanced Micro Devices Inc. (AMD)
Modern data centers are more than just air-conditioned warehouse space for tech companies to rent. They are incredibly sophisticated, high-tech digital information centers that are critical to the infrastructure of our increasingly electronic economy.
AMD is a $233 billion company that engineers and manufactures many of the graphics cards that power data centers and AI applications all over the world.
Specifically, AMD is a global leader in the semiconductor industry. This company’s processors and microchips are in very high demand, and not just for computers and servers. Its chips and switches are used in phones, smart tablets, automobiles, satellites and much more.
The growth in digital infrastructure — including data centers — and many other information technology applications is closely tied to AMD.
Digital Realty Trust Inc. (DLR)
DLR needs no introduction to data center REIT investors. The company boasts a market cap of nearly $60 billion and has a current yield of 2.7%.
DLR is active in more than 25 countries around the world, but it does much more than just rent commercial real estate. All of its facilities offer their premier data processing and storage product PlatformDIGITAL. A sizable percentage of the company’s tenants take advantage of this innovative hardware and software solution, significantly boosting the company’s revenue.
The performance of this REIT has been impressive in 2024. DLR has appreciated more than 34% year to date. This compares very favorably to the S&P 500, which has risen about 20% over the same period.
Raymond James Equity Research rates this REIT “strong buy.” Both Jefferies and Stifel have a “buy” rating on the stock.
Nvidia Corp. (NVDA)
NVDA has been focused on graphics processing units, called GPUs, since its founding in 1993. The company exploded onto the investing world’s consciousness in 2022 when large language model AI platforms became available to the public and NVDA became a leader in AI microchips.
In addition to designing and manufacturing the networking chips that power AI, NVDA provides highly advanced processors that are essential for AI data processing and storage centers. This is to say nothing of its continued dominance in the gaming, entertainment, robotics and self-driving automobile segments.
The stock’s market cap is now well over $3 trillion, and the demand for its products is increasing fast.
NVDA is not a data center stock per se, but the growing popularity of AI and the chips and processors made by NVDA is closely related to the growth in data center stocks.
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7 Best Data Center Stocks, REITs and ETFs originally appeared on usnews.com
Update 11/06/24: This story was previously published at an earlier date and has been updated with new information.
