Motley Fool Money - For Data Centers, Power is the New Real Estate (Literally)

Episode Date: January 13, 2026

Data centers are still the headline, but the real pinch points are power and real estate. Emily Flippen is joined by Motley Fool analysts Anders Bylund and Dan Caplinger to map the data center buildout, the risks of “overbuild,” and where investors can look for exposure without paying bubble prices. Companies discussed: MSFT, AMZN, NEE, GOOGL, HPE, AAON, STRL, DLR, FIX, EME, AMT, EQIX, IRM, STN, SBGSY Host: Emily Flippen, Dan Caplinger, Anders Bylund Producer: Anand Chokkavelu Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

The opportunity in data centers is increasingly looking like an opportunity in power and real estate. We're digging in today on Motley Full Money. Today is Tuesday, January 13th. Welcome to Motley Full Money. I'm your host, Emily Flippin, and today I'm joined by full analyst Anders Byland and Dan Kaplanar as we dig into data centers and the different ways investors can play on their buildout without baking in too much risk. We'll walk through all the different players that are helping make data centers a reality, how sustainable the build out really is, and how mega investors are helping fund them at scale. But to start, we have to talk about why we're discussing data centers today.

Of course, everyone knows large tech companies have been building data centers at breakneck speeds to help facilitate the AI ambitions that we all know and some of us love. I mean, artificial intelligence requires massive amounts of data center capacity to not only handle the queries that are being sent by U and I and enterprises to LLMs, but also to help iterate and constantly train those same models. But this is a topic that's really hitting close to home recently for individual Americans alongside investors. I know myself, I live here in Maryland.

I'm just a stone's throwaway from Northern Virginia. It's sort of ground zero for Data Center Biddle in the United States. CBRE has recently released reports noting that data center vacancies are at all-time lows in the second half of 2025. Many big customers are pre-leasing out capacity into 2027 and beyond. So for the people living nearby, this means higher electricity costs, and data centers obviously require massive amounts of power to run. So that's some of the backdrop.

Dan, I want to start with the capacity. I think investors' minds often immediately turn to the fear that the data centers that we see so far have actually been overbuilt. That's given the narrative that we talk about a lot around fears, around an AI bubble. But the information that we have that I just indicated, I mean, that only shows that demand has continued to outstrip supply. How does that build out look to you today? Yeah, so it's funny, Emily, because yes, I've heard those stories about how we're overbuilding data centers left and right. But the fact is that most of those data centers that we've heard

about, they haven't even been built yet. Investors, I think, are reacting more to news of the planned deployment of future data centers than are talking about than about data centers that are currently on the ground right now. Building completions, I mean, they're going up pretty fast, but it's not an overnight thing. There's a lot of infrastructure. There's a lot of supporting work that has to go into getting a data center up and running. It's going to take years to get all the ones that are planned actually built. Now, yes, there is some risk of a reversal if hyperscalers take their plans and get cold feet about, okay, yeah, are we going to get the return on investment that we had hoped that we were going to get? Yeah, sure, that might make people pull

back on their plans to complete some of the ones that are scheduled to get done in out years. But I think we're a long way from that point. And right now, the existing data centers that are up and running and operational are not enough to take care of the current demand that AI and other intensive computing applications are requiring. Yeah, there's kind of two parts to that equation. They're the people who need the capacity in order to fund operations to fund the queries and the training that we talked about. And there's also the people who are actually funding the projects themselves who are offering capital. You need both part of those equations to make that work. And so far, we haven't seen cracks happening on either side of those equations.

But that doesn't mean that there hasn't been public pushback just from the people's who do daily lives have been impacted from these expansions. And Anders, that build out that is happening and continues to happen, as Dan mentions, it has massive implications for things like energy consumption. The IEA projects that global energy consumption for data centers alone will double by 2030. And in the United States, the Pew Research Center projects that AI-based electricity usage will rise 133% in that same time period. So I understand that a lot of investors hear that, And they think the obvious takeaway is that there's going to be a need for infrastructure investment, right? That's a great opportunity for energy investments over the next couple of years because you need energy to power those initiatives.

What do you personally make of that? Yes, I mean, there is definitely that side to it. But like you said, it's a multi-layered story. The big story here isn't just that there is a big demand for more energy. It's also that the imbalance between supply and demand means that price, are rising and it's hard to keep up with the buildouts as fast as you need to. So what a lot of hyperscalis are doing is they're taking control of their own destiny and building their own energy sources, building or buying, I should say.

For example, recently Microsoft has restarted or signed a deal to restart three-mile island with the kind of traditional reactors that are already there, but they're going to get replaced over time with the smaller modular reactors. So a nuclear power in Microsoft's hands, but they're not the only ones. Amazon is doing the same thing. They recently bought a nuclear powered campus with plans to install modular mini reactors. And Google isn't exactly doing that. Instead, they're signing deals with independent companies like Nextera Energy,

which is another supplier of modular. nuclear reactor. It's nuclear is making a comeback, you know, a decade or so after Fukushima, but in a different form. And maybe this will go over okay with the people and regulators. I don't know. But it's one way to get your hands on cheaper energy and in the long run. It's still not cheap to build, but it will get affordable to run. That's one way to get the power you need for your data centers. It reminds me of this quote. I never watched House of Cards, but I know this quote from the Netflix TV show, which

is, what is it, powers the new real estate, something along that line. And I think the commentaries around physical power, like the influence you have of other people, not actual energy power, but in this context for the people who are investing and trying to make AI a reality, it is kind of the real estate that you, you need. And it is, I think, the bottleneck that investors are missing, which is the energy consumption that is necessary. And it's very much the real bottleneck that these hyperscalers are facing. You can have access to all the physical real estate in the world in Northern Virginia, or wherever it may be. And you can have access to all the capital in the world. But if you

don't have access to energy, or if there are local regulations or local pushback that is preventing you from being able to access the energy that you need to run your data centers, then you lack the power. You lack the influence to actually make your dreams, whatever they may be. Your data centers are a reality. So it makes a lot of sense to me that we see companies like Nextera, Microsoft, Amazon, Google, all of these companies trying to gain access to the limited supplies of energy and power that we have, that they need to now because what they're talking about in terms of the buildout of data centers,

they need that. And right now that is the bottleneck that exists. Right, and it's not exactly new. I know for years, companies like Microsoft and Google have been building data centers with paying close attention to where they get their energy from and signing deals with local water power resources in places like Canada, northern Sweden, for that matter. There's a Google data center up in Kirna somewhere.

That is powered by a local waterfall, basically. So, you know, it's not exactly new, but it's up to, a new level. Yes, exactly. And that's why I'm so excited about this opportunity because so many people stop that that one level of degree where they think about data centers and they think about the companies physically building data centers and they don't get to the next degree of separation about the companies that are helping make data centers or reality. So up next, we're going to be breaking down the investment opportunities for data centers, but at different

points on the value chain. So stick with us. We're going to be taking that one step further, talking about some specific companies benefiting from the AI data center buildout. The old adage goes, it isn't what you say, it's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive. Inside, you'll find true modern luxury with the latest

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and the like. And our last segment, we'll get to some picks and shovels plays. But for now, let's keep it to the direct beneficiaries. Anders, I want to start with you. If an investor wants public market exposure to the data center buildout, where are you sending them first? So one stock I'm really excited about in this space is HP Enterprise. You know, one half of the old Huleth Packard conglomerates that's been around for decades. But it split up in two parts about 10 years ago, and HPE has become a giant in building high-powered computer systems, which is perfect for the kind of data centers that AI, hyperscalers need.

When you look at the top 500 list of supercomputers these days, in the top 10, about six of them, I believe, were built by HP in the last update in November. And these guys know how to build really high-powered systems. That comes in handy at this point. So despite the HPE's muscle in the data center space, where they can provide anything from the actual supercomputers to now with Juniper Networks under the networks that put them together and the feed data from one part of system to another and then out to the world. They build everything except the building, basically. And despite this strong position, the stock is trading like a,

an absolute bargain with a forward PE around eight and a price turned to growth ratio about 0.5. Anything below one is supposed to be a bargain and this is a good bargain. A price to sales is under one too. It's like you know you're buying a Walmart stock here but you're getting an AI powerhouse instead. So it's hard to beat that in my book and I'm actually excited about boring old HPE at this point. It's so interesting to hear you mention HPE because when I think about HPE, I think about the company that it probably was a decade ago, more than a decade ago, which was the consumer electronics laptop company. I think it was the brand that made my first laptop, but they've spun off their consumer business now. And

this is a business that is trying to reinvent itself, making that acquisition of Juniper has given exposure to the AI data center boom and build out. It's valued like a legacy business. And to an extent I can understand why I think Wall Street, myself included, as part of that, have a maybe outdated view of this company. It's valued, maybe a bit like a value trap. But if they're able to get some of that exposure and get that return to growth of the AI data center buildout, you can also understand how this is a business that has a management team that is trying to turn things around and is forward thinking in a way that the market is just simply not giving them credit for. So I think it's incredible.

We've been doing this podcast and talking about AI and data centers for so many years now. And nobody Anders has mentioned HPE before, HPE, I should say, before. So it's certainly one for us to dig into more. Dan, I want to pass it to you. What data center or even really data center adjacent opportunities do you think are going underappreciated by the market today? Anders has set the bar high with HPE. I don't know if I'm going to get that high,

but Emily, you and Anders were talking earlier about hyperscalers building out their own data center installations, and that's been a big part of the demand, but there is a whole class of different companies, the real estate investment trusts that concentrate on data center, being a third-party data center provider, and they're doing their own installations. Some of these companies are specifically doing data centers, in particular, digital realty trust, ticker DLR, is the most obvious company in this space. They have really hammered down on the data center opportunity. But you've also seen some other real estate investment trusts jump in. Companies like Equinix, which ticker EQIX, Iron Mountain, ticker IRM,

and even American Tower, ticker AMT. You might know these REITs. They did different things in the past. For instance, American Tower really concentrated on billing cell towers for 5G, wireless networks. But the data center opportunity really has just been so strong that these companies haven't been able to resist the allure of diversifying their businesses. And so a lot of companies trying to really try to get data centers on the ground, no matter, you know, in whatever way they can. Well, after me talking about how power is the new real estate, maybe real

estate is the new real estate, maybe real estate is a really getting disrupted. You still do need the physical assets there. So it's good to mention. and some of the REITs that are still benefiting from the Data Center buildouts as well. But up next, we're going to move on to what is, I think, my favorite segment of today's show. We're going to be digging into the real picks and shovels of Data Center, some of the under-recognized businesses that help make them a reality. So stick with us. These days, I'm all about quality over quantity, especially in my closet.

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Welcome back to Motley full money. As we wrap up today's show, we're going to discuss some even more. under-the-radar businesses that are operating as the picks and shovels of AI data center buildouts. These are the type of opportunities that are my personal favorites. I have to call out one or two here just for fun. For example, when I was running the Marijuana Master's Investing Service here at the Fool, we were always looking for these types of ancillary opportunities that benefited from things like cannabis legalization without being overly indexed to it. And one such example was a company called Aeon Inc. Their ticker symbol is A-A-O-N. They were a customer,

a custom HVAC manufacturing company that was actually one of the first businesses to help make custom heating systems for cannabis greenhouses in North America. And ironically, Aon is actually also has exposure to the data center built out too because they made an acquisition of a company called Basics a couple of years ago that helps manage thermal cooling for hyperscalers. I mean, these are the types of companies that you would never otherwise hear about that still massively benefit from the expansion of data centers that when everyone else is focused on the hyperscalers of the world. These are the kind of quiet beneficiaries. So, Dan, I already mentioned Aon. Are there any ancillary or picks and shovels plays

for data centers that are on your radar? Yeah, there's a ton of companies out there that have traditionally been in low growth areas that have turned out to have specific expertise that's vital for data center construction and operation. And it's really helped them take off and generate a whole new growth story. Sterling infrastructure, for instance, ticker STRL, it's traditionally done more civil engineering work. If you've driven on a highway or you've driven over a bridge, odds are good. They may have had something to do with that. But Sterling has also moved into providing concrete pads and design work on data center installations. They've also done work on some of the systems that go into them. And just the project management to get these

data centers completed, Sterling has turned into a real business. Yeah, it's funny. You mentioned Aon. There's a couple of other companies that I'm looking at that are kind of in the mechanical, electrical, and cooling area. Comfort systems, ticker FIX, has particular expertise in HVAC applications. Data Center refrigeration has become a new focus. And then M-Core, ticker EME, kind of similar exposure to electrical plumbing. A lot of just the innards of the these data centers. You don't think of, you generally think of just rows of computers. There's a whole bunch of other duct work and work that goes into making these data centers a reality. It's these companies that are benefiting from it the most. It's kind of hit some investors' radars already,

but I think there's still a lot more room for them to continue to grow in the years ahead. So I know comfort systems and MCOR for the listeners who are members of Stock Advisor are probably pretty familiar because those are two recommendations on the hidden gym side of the scorecard. Since this is the Tuesday rule breaker focus hour, I have to balance the score here, Dan. I have to talk about another company actually fits really well. That's on the rule breaker side of the scorecard. A company called Stan Tech. As you were talking about Sterling infrastructure, reminded me a little bit about Stan Tech. The ticker's STN. That's on the rule breaker side of the scorecard. They're a Canadian design focused engineering consultant company. And they also have

It's single-digit exposure in terms of top line, but exposure to the data center buildout as well, helping design projects, as well as some energy projects and infrastructure, that sort of thing for data center buildout in North America. So there's just so many unique ways to play it. I love those stocks. Anders, what about you? Anything you're watching that's benefiting from data center buildouts, but not say over-exposed to it? Right. So Dan was talking about the plumbing that goes into the data centers, and mine is one of those. You have power generation, you have AI systems, you need to connect them together so they can actually run on that power.

And one of the specialists in that is Schneider Electric. It may sound like a German company or something, but it's actually French. And trading on the over-the-counter market instead of NYSC or NASDAQ, which leaves it out of the media circuit. And a lot of people want to recognize it. But if you walk into your local Lowe's or Home Depot or any other hardware store and wander into the electricians department, you will find that a good chunk of the electric gear there is made by Schneider Electric under the name Square D. It's like about one-third of the brake panels and the electric switches you'll find in.

the local hardware store. But it's not just for residential construction. They also make power panels, switches, everything you need to get electricity from point A to point B in a data center. And data center and sales are a major contributor to their growth in recent years. So Square D, by the way, was an all-American company that Schneider, bought in 1991, I believe, to get a foothold in the American market. And there's still a major player today, thanks to that acquisition.

Sometimes these deals work out. But most people won't know it as Schneider Electric, so they wouldn't know how to invest in it. And there you go. It's a fairly modestly valued stock, a little bit cheaper than arch rival Eaton. And, you know, it's one of those things to have to look for. You just won't stumble over it. You have to go looking for it. Absolutely incredible.

I mean, after today's podcast, I think our listeners have plenty of really unique ways to play at the data center build out without being over-exposed or over-indexed to any single center, any single trend. Some really great businesses that are very diversified across all parts of the value proposition for data centers here. So Don and Anders, thank you both so much for joining. As always, people in the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. All personal finance content follows the Mottley for editorial standards

and is not approved by advertisers. Advertisments are sponsored content and provide for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Dan Kaplanger, Anders Byland and the entire Motley Full Money team, I'm Emily Flippen. We'll see you tomorrow.