Top 3 data center stocks to buy as BlackRock nears deal to buy Aligned
News Summary
Global Infrastructure Partners (GIP), owned by BlackRock, is reportedly nearing a deal to acquire Aligned Data Centers (ADC) for over $40 billion. This transaction underscores the robust demand for computing power, particularly from the artificial intelligence (AI) sector, with Citigroup analysts predicting over $2.8 trillion in AI industry spending by 2029. The article highlights three data center stocks to consider: IREN, Iron Mountain, and CoreWeave. IREN, originally a Bitcoin miner, has successfully pivoted to AI cloud services, significantly boosting its AI cloud capacity and anticipating an annual recurring revenue (ARR) of $500 million in Q1. Iron Mountain is seeing substantial growth in its data center segment, with management expecting a 30% revenue increase. CoreWeave, also transitioning from Bitcoin mining, has become a key AI data center player, partnering with giants like Microsoft, Meta Platforms, and OpenAI, and is projected for significant revenue growth.
Background
The data center industry has experienced significant growth over the past few years, primarily driven by a surge in demand for computing power, notably propelled by the artificial intelligence (AI) revolution. Analysts anticipate robust spending in the sector will continue in the coming years. For instance, Citigroup analysts predict the AI industry alone will require over $2.8 trillion in spending by 2029. Against this backdrop, major infrastructure investment firms like Global Infrastructure Partners (GIP), owned by BlackRock, are actively pursuing substantial acquisitions to capture market share, exemplified by its nearing $40 billion deal to acquire Aligned Data Centers.
In-Depth AI Insights
What are the underlying strategic implications of large-scale M&A and industry pivots in the data center sector for long-term investment? - Industry Consolidation and Economies of Scale: GIP's $40 billion acquisition of Aligned indicates a capital-intensive consolidation phase in the data center industry. Scale and robust capital access will become critical competitive advantages, likely driving further M&A activity that solidifies market leaders and raises barriers to entry for new players. - Core Validation of AI Demand: The pivot from Bitcoin mining to AI data centers by companies like IREN and CoreWeave is not merely opportunistic; it is a powerful validation of the immense and tangible demand for AI compute infrastructure. This suggests a sustained period of high growth for providers of GPU-accelerated computing. - Infrastructure Investment Supercycle: Multi-billion dollar deals and trillion-dollar AI spending predictions signal a massive, multi-year infrastructure investment supercycle. This creates a strong tailwind for hardware providers, specialized data center operators, and even certain real estate investment trusts (REITs). Given President Trump's re-election, how might his administration's policies, particularly regarding technology and competition, influence the rapidly consolidating and strategically vital data center industry in the US? - "America First" Tech Strategy: The Trump administration might prioritize domestic data center development and AI infrastructure, potentially through tax incentives or subsidies, to bolster U.S. technological leadership. This could benefit U.S.-centric operators like Aligned and Iron Mountain, but potentially increase operational costs through protectionist policies or skilled labor shortages. - Antitrust Scrutiny: While generally pro-business, a Trump administration could apply antitrust scrutiny to large tech mergers if they are perceived to stifle competition or harm smaller domestic players, especially in critical infrastructure sectors. This might complicate future large-scale consolidations, though deals involving infrastructure funds like GIP/Aligned might be less of a direct target than those involving tech giants. - Energy Policy & Regulation: Given the immense power demands of data centers, Trump's energy policies (potentially favoring fossil fuels and deregulation) could influence energy costs and environmental compliance for these facilities. Reduced regulatory burdens might lower operating costs but could also lead to public backlash regarding sustainability.