Introduction
Barclays has identified various entry points for investors looking to capitalize on the growing electricity demand, ranging from data center operations to suppliers. This surge in demand is substantiated by recent forecasts from the International Energy Agency (IEA) indicating a potential doubling of electricity consumption by 2026 due to data centers, artificial intelligence, and the cryptocurrency sector. In particular, data centers play a significant role in this trend, with an estimated global electricity consumption of over 1,000 terawatt hours in 2026, equivalent to Japan’s electricity consumption. This article explores investment opportunities in the data center industry, focusing on data center operators, suppliers, and grid infrastructure builders.
Investment Areas and Opportunities
Barclays has identified three key investment areas within the data center industry: data center operators, suppliers, and grid infrastructure builders. The following are some notable opportunities in the U.S. market:
Microsoft
Microsoft stands out as one of Barclays’ top picks due to its extensive data center footprint and ambitious sustainability targets. With a global market share of around 30% in the public cloud market and over 200 data centers worldwide, Microsoft aims to operate entirely on renewable energy sources by 2025. The company has also expressed interest in utilizing nuclear energy through small modular reactors (SMRs) to power its data centers, which analysts consider a significant investment area to monitor. Microsoft’s focus on electric power grid technologies and expansion of grid-interactive battery storage further highlights its dedication to sustainability.
Digital Realty Trust
Digital Realty Trust demonstrates a higher exposure to data center revenue, making it an appealing investment opportunity. With over 300 facilities globally, including nine data centers in Ireland, Digital Realty faces increased risk due to soaring electricity consumption. The company’s long-term goal is to provide renewable energy to all customers, with approximately 126 facilities already matched with 100% renewable energy. One of Digital Realty’s most ambitious goals is achieving carbon neutrality for data centers within the European Union by 2030. The recent joint venture with Blackstone to develop 10 data centers across strategic locations further highlights its growth potential.
Advanced Micro Devices
Advanced Micro Devices (AMD) is an attractive investment option due to its focus on data storage. The company aims to improve the energy efficiency of its processors and accelerators by 30x between 2020 and 2025, particularly for AI training and high-performance computing. With approximately 25% of the global server CPU market, AMD holds a strong position in the industry and presents an opportunity for investors.
Additional Opportunities
Barclays also recommends considering investments in other industry players such as tech hyperscaler Amazon, power management company Eaton, and chipmaker Advanced Micro Devices. These companies are expected to benefit from the AI-fueled data center boom and provide potential investment opportunities.
