Announcements from major artificial intelligence companies regarding potential slowdowns in development have recently pressured shares of data center-focused real estate investment trusts, raising questions about the sector’s outlook. AI has become the primary demand driver for data center capacity, with projections suggesting it could represent roughly 70% of global data center capacity demand by 2030, according to analysis from McKinsey. Industry forecasts indicate that meeting total data center demand through 2030 will require nearly $7 trillion in capital investment, with real estate comprising an estimated $3 trillion of that investment over the subsequent five years.
Andrew Power, chief executive of Digital Realty, one of the largest data center REITs, characterized recent pledges from artificial intelligence firms to moderate the pace of advancement as not signaling a complete halt to the sector. He highlighted that significant digital transformation and cloud computing expansion continue independent of artificial intelligence development. Power noted that hyperscalers have faced trade-offs between expanding their commercial cloud operations and dedicating capacity to AI infrastructure. Geographic markets matter considerably, he explained, as certain regions including Northern Virginia, Dallas, Chicago, Singapore, Tokyo, Frankfurt and Amsterdam experience sustained demand exceeding available supply.
Industry analysts generally concur that a slowdown in artificial intelligence model development would not directly diminish the physical infrastructure requirements for deploying existing AI systems. Andrew Batson, global head of data center research and strategy at JLL, emphasized that future data center expansion will be primarily driven by inference—the widespread adoption of AI tools by businesses and individuals in everyday applications—rather than by the creation of new models. He noted that only approximately one in four Americans currently utilize AI on a daily basis, indicating substantial room for adoption growth and corresponding infrastructure demand.
Institutional investors including Blackstone, BlackRock and KKR maintain significant positions in the data center sector, according to Batson, suggesting underlying confidence despite recent market volatility. Power stated that Digital Realty has positioned itself defensively, evolving its funding approach over previous years and establishing what he described as optimal liquidity and leverage levels. The company’s development pipeline currently stands at $20 billion in active construction, nearly double the $10 billion figure reported at the end of 2023.
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