Investing.com -- BTIG initiated coverage of Digital Realty Trust and Equinix with Buy ratings in a note on Friday, arguing that AI-driven demand has created the conditions for a data center supercycle that could last decades rather than years.

Analyst Thomas Catherwood said the most important analytical distinction for real estate investors is whether demand is cyclical or secular in nature, placing data centers firmly in the latter camp.

"Data centers are in the midst of a similar paradigm shift" to the one industrial real estate experienced during the e-commerce boom of the mid-2010s, he said, with AI investment driving higher facility utilization, rent growth and record development activity.

BTIG set a $215 price target on Digital Realty and a $1,210 target on Equinix, citing record hyperscaler capital expenditure projected at more than $650 billion in 2026, up 72% year-on-year, as the primary demand driver.

Data center rents have risen 63% over the past five years, while new developments are expected to increase global supply by 86% through 2030 at an estimated total cost of $5.1 trillion.

Despite the record construction pipeline, Catherwood said supply constraints around power availability, long lead times for physical components and high capital requirements mean the typical cyclical supply overshoot is unlikely.

Rystad Energy estimates current demand could support 376 gigawatts of data center development, more than three times current levels, if power and capital were more readily available.

BTIG said it favors operators with "proven track records, operational expertise, flexible capital structures, and concentration in core markets" as the sector attracts capital at unprecedented scale.