Data Center Backlash Will Help These REITs, Wall Street Says

The artificial intelligence-driven data center boom is generating significant political resistance at the state and local levels, but this regulatory backlash is creating unexpected competitive advantages for established data center REITs. New York's recent decision to impose a moratorium on hyperscale data center construction—targeting facilities drawing 50 megawatts or more of power—represents the first statewide restriction of this magnitude and reflects broader concerns about energy consumption, power grid strain, and local infrastructure impacts. This regulatory environment, however, is positioning existing REIT operators with operational portfolios as increasingly valuable assets in a supply-constrained market.

Wall Street analysts are viewing the political headwinds as a catalyst for REIT valuations rather than a threat. Guggenheim analyst Joseph Osha upgraded Digital Realty Trust to buy, explicitly noting that political opposition and regulatory barriers surrounding new construction will enhance the competitive moat of companies with established operational data center footprints. The thesis suggests that reduced supply of new competitive capacity, combined with accelerating AI-driven demand, creates a favorable environment for incumbent operators with existing leases and facilities already in operation.

Equinix, the market's largest player, is tracking toward 14% funds-from-operations growth in the second quarter of 2026 when it reports earnings on July 29, with shares already appreciating 33% year-to-date. Digital Realty Trust, the second-largest operator, is expected to report 6% FFO growth when reporting on July 23. Both companies offer dividend yields of 2% to 2.8%, respectively, providing income returns that exceed the broader S&P 500's 1% yield—an attractive profile for institutional income-focused portfolios. The growth is underpinned by long-term lease agreements with major hyperscale operators including Microsoft, Google, and CoreWeave, ensuring revenue stability despite near-term regulatory uncertainty around new facility development. As McKinsey research suggests, U.S. data center demand driven by AI applications could triple by 2030, requiring nearly $7 trillion in total investment—a dynamic that should support sustained occupancy and pricing power for operational REITs even as permitting and construction timelines for new capacity face extended regulatory scrutiny.